Larger regional brokerages face fewer legal and regulatory challenges than their large global competitors and have added business after investigations hit top echelon brokers, said one investment bank analyst.
Morgan Stanley property-casualty analyst William Wilt made that observation after hosting a recent day-long conference focusing on the insurance brokerage industry that featured panels of risk managers, regional and global brokers, and reinsurance brokers.
While Marsh McLennan, Aon, Willis and A.G. Gallagher have pledged in settlements not to accept contingency fees as part of agreements with investigating regulators, their competitors have not made any such agreements.
In addition, the big brokers have been forced to disclose their compensation in more detail than perhaps risk managers would care for.
"Risk managers are buried in transparency documents and complicated procedures," Mr. Wilt wrote. "Distinguishing between boilerplate and legal disclosures versus documents meaningful to their insurance programs is not always easy."
The Big Four brokers face a world not only without a significant source of revenue but with increased regulatory and compliance requirements. "Moreover, with the risk managers actively engaged in fee discussions and questioning the value proposition of their brokers, we find it hard to believe pressures on fees will disappear anytime soon," he wrote.
And yet clients do not seem overly concerned with contingency fees, despite all the legal and political uproar over them. "Contingent revenues that are properly disclosed continue to be an important stream and they are not expected to disappear anytime soon," Mr. Wilt wrote. "It does not seem like clients have pushed them to drop the practice overall."
Investigators filed actions against the big brokers alleging the fees served as kickbacks to brokers who rigged bids and steered customers to a circle of insurers.
As for loyalty, most risk managers seemed to agree it was more to the individual or account teams. "Risk managers sounded frustrated with the 'lack of loyalty' and 'musical chairs' so pervasive across the insurance brokerage industry today," Mr. Wilt wrote.
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