Aon to accept contingent commissions

Broker Aon has said it will accept various forms of compensation, including contingent commissions, following a worldwide review of payment practices.

“We have conducted a great deal of research around broker compensation across the globe with a focus on serving the needs of our clients and competing on a level playing field in the marketplace,” said Steve McGill, chairman and chief executive of Aon Risk Solutions.

“As a result, we have decided to accept various forms of compensation available, which may include supplemental and/or contingent commissions in the geographies and client segments globally where appropriate and legally permissible.”

The comments closely follow the publication of a 16-page white paper by rival broker Willis, authored by law firm Edwards Angell Palmer & Dodge, highlighting the conflicts of interest inherent in accepting contingent commissions. The commissions are essentially payments from insurers to retail brokers in return for placing business with them. The payments are contingent on variables such as the growth or profitability of a book of business.

Willis voluntarily stopped accepting contingent commissions in 2004 following an industry-wide investigation of the practice by then-New York Attorney General Eliot Spitzer. It has remained a staunch opponent of contingent commissions since then.

Marsh said in March that it would not accept contingent commissions for US clients served by the firm's core broking operations but its personal lines and sponsored arms would continue to take the payments.

In February this year, a ban on brokers accepting additional payments from insurers was lifted in the US following an agreement between the three global insurance brokers – Aon, Marsh and Willis - and US regulators.

The Risk and Insurance Management Society, (RIMS) said it is disappointed in Aon’s decision.

“RIMS urges Aon to join other large brokers in agreeing not to accept contingent commissions,” said RIMS secretary Scott Clark.

“Ultimately, we would like to see the insurance industry as a whole adopt practices that place the broker in a position that best serves purchasers of insurance.”

RIMS said it viewed Aon’s intentions as a "step backwards with regard to the level of service it provides to its clients". It maintains the position that contingent commissions should be universally banned.