Aon Chief Says Spitzer Helped Broker's Business

Eliot Spitzer's investigations into insurance broker's contingent compensation may have had some unintended benefit for Aon, by forcing the door open for clients to seek the opinion of more than one brokerage firm for their risk placements, the firm's chief executive said.

The comments came yesterday during an insurance investor's conference sponsored by Merrill Lynch. In answer to a question, Gregory C. Case, president and chief executive officer for the Chicago-based brokerage firm, said that after the New York Attorney General's investigation, many accounts felt it was necessary to get a second or third broker to look over aspects of their insurance business.

"It was really wonderful for Aon, because it gave clients the chance to see us for the first time," Mr. Case said. "It ebbs and flows."

Mr. Case was referring to the allegations of kickbacks raised by Mr. Spitzer in 2005 that resulted in the four major brokers giving up taking contingent commissions and paying millions in restitution to clients.

The desire to explore new brokers, however, was stopped cold by Hurricane Katrina later that year.

"The biggest catastrophe in the history of the world, $60-plus billion, and clients were more worried about how do they get their claims covered," he said. "It went from, where do I need to go look, to I'm frozen."

But the current economic climate has changed the direction again. Clients now are "looking and moving around again," he explained. "It's no longer just about placement. Placements [are] interesting, but not that helpful in the current environment where you are trying to fight for your life and [survive]. You have to get claims paid. You need muscle to do that and you have to change terms and conditions."

Later in the day, Joe Plumeri, chief executive officer and chairman of Willis Group Holdings, discussed the merger with the firm and Hilb, Rogal & Hobbs, observing that in his long career this is one of the best integrations he has ever been involved in.

Only 2 percent of HRH's producers have left the company and the firm has cut down on the number of carriers HRH did business with. Willis is taking no supplemental commissions, something HRH did, and has replaced those lost supplemental commissions with increased upfront commission payments. They could do this because HRH was receiving substantially less in commissions than the firm should have been getting, he said.

"I'm not a believer in supplementals," Mr. Plumeri observed. "If it doesn't work out, we can sit down and talk about it."

When asked about why Willis' stock sells for less on a P/E basis than its peers, Mr. Plumeri said he has asked the same question and has not come up with an answer, other than its margins are higher than its peers and investors are punishing the firm for its success out of fear it can not do better.

"I think that we are unduly damaged by the fact that we are good at what we do," Mr. Plumeri said, adding that the comment was not made out of arrogance, but rather honesty.