Plumeri faces heat after Willis contingent U-turn

Willis boss Joe Plumeri was under fire today for his decision to perform a U-turn and accept contingent commissions on employee benefits.

Plumeri had spearheaded a “clients before contingents” campaign against the controversial payments, and Willis even dubbed them “the wild of west insurance compensation” (see video link below).

But today, that campaign lay in tatters as risk managers’ association Airmic warned about the consequences of accepting the payments.

The Clients Before Contingents campaign website is down, although it is thought to have been the case for some months now.

A Willis spokesman stressed that the company still refused contingents on other lines. However, that is not holding much water with Airmic.

John Hurrell, head of Airmic, said that while the association was not seeking to tell brokers how to run their business there were likely to be certain basis of remuneration available to them that were likely to cause conflicts of interest.

“I think we have been fairly open in saying that we think contingent commissions are the most likely forms of remuneration to lead to conflicts of interest.

“The very fact that they are contingent means that they are triggered by certain factors which in turn means that will influence behaviour so it will either be growth or profitability whatever it might be.

“If it is growth then it is likely that it will tend to skew the market.”

Hurrell said that brokers including Willis knew this fact only too well, while many of Airmic’s members believed strongly that contingent commissions were incompatible with a situation where a broker represented their client’s best interests at all times.

“I think that any movements towards contingent commissions are likely to take us back into the sorts of areas of strife that we have had in the past,” he said.

He said that recent developments at Willis flew in the face of the company’s previous stance on the matter which was respected by Airmic members, but he was sure that they would take a different view on the broker’s decision to change the position of one particular class of its business.

“This latest development is a bit of a surprise given the trouble it caused the first time around and the impact that it had once the New York Attorney General intervened, particularly on businesses,” he said.

Willis will start accepting contingent commissions on employee benefits, starting from April 1.

Contingent commissions have been a big bone of contention ever since former New York Attorney General Eliot Spitzer took on Marsh & McLennan Cos.

They represent the sums paid by insurers to brokers based on how much business the broker places with the insurer concerned and have caused controversy as a broker’s decision about where to place that business could potentially be driven by the contingent payments rather than client considerations.