Willis Wary Of Supplemental Commissions

Willis Group will not accept new supplemental commission programs from insurers if the payments are in reality just old-fashioned contingency fees in another format, the brokerage's top executive contends.

Chairman and Chief Executive Officer Joe Plumeri said the supplemental compensation several insurers are proposing will not be accepted by Willis “if we determine that these arrangements are simply contingent commissions under a different name.”

Mr. Plumeri's comments were contained in the text of a speech he delivered last week at the Financial Services Authority's annual industry conference in London.

Contingent commissions were dropped by Willis and other large brokers after investigations by New York State and other jurisdictions found they had served as a hidden reward for brokers' participation in alleged price-fixing schemes.

Insurance carriers Travelers and Chubb have both said they are developing supplemental payments to replace contingent commissions, which the companies no longer pay producers.

The carriers ceased making the payments after reaching an agreement with then New York Attorney General (now governor) Eliot Spitzer and other attorneys general to end alleged abuses.

Earlier this month, Willis put out a statement saying it was reviewing the new compensation plans.

Mr. Plumeri said that even if both the broker's legal department and regulators deem the payments acceptable, the firm still may refuse to accept them if they are not in the interest of clients.

“We don't make decisions based on rules and legal interpretations. We make decisions and run our business based on principals,” according to the text of his speech.

However, the firm's approach is not completely “altruistic,” he said, noting that the firm expects to be paid for its work.

Discussing other regulatory matters, Mr. Plumeri called for the adoption of an optional federal charter for U.S. insurers, noting that in the United Kingdom, there is “one regulator, one set of rules–a level playing field.”

He also called for some reform of Sarbanes-Oxley corporate governance rules. Without mentioning specifics, he said, “the law and the resulting regulations have amounted to a yoke around the necks of CEOs and CFOs.”

He said some of the regulations should remain in place, “but if the result is that companies are afraid to invest or take risk to drive forward, then the rule has won out over the principal.”

The full text of his speech is available on the Willis home page at www.willis.com.