UK insurers get set to pay contingency fees

The UK’s corporate insurers are preparing to pay contingent commissions, following a series of agreements with US regulators that will allow the major international brokers to accept them once again.

Insurance Times spoke to insurers including Aviva and RSA, which confirmed that they would be willing to pay the extra commissions – which, until last month, had been illegal for the three largest brokers, Aon, Marsh and Willis, since the Spitzer inquiry of 2005.

The average contingent commission tended to be around 2%, translating to millions of pounds on high-volume corporate accounts. Analysts have estimated that Marsh and Willis could each make an extra $200m (over £130m) per year.

Janice Deakin, intermediary and partnerships director at Aviva, which has recently returned to the corporate risks arena, said: “The most important thing is how the brokers want it to work in their businesses. We are willing to sit down with them and work out the best way. The great thing about contingent commissions is that they help us to share the reward with the broker.”

An RSA spokesman said: “We will be happy to pay them when it makes sense.” QBE declined to comment.

A leading industry analyst said all the major insurers would be looking closely at the issue.

Willis has publicly said it will not accept contingent commissions because it does not think they are fair to customers. In an interview with Insurance Times’s sister publication StrategicRISK, Willis’s chairman, Joe Plumeri, said: “There are a whole bunch of things in life that you just should not do because you should be guided in business and in life on your principles, not on what’s regulated.”

But the other international brokers have left the door open. JLT chief executive Dominic Burke said: “While always putting our clients' interests first and observing our responsibilities of transparency to them as well as our regulatory obligations, we always seek to optimise our earnings from the market.”

A spokesman for Marsh said: “The actions by the New York State Insurance Department and the New York Attorney-General have helped to restore a level playing field for MMC and other insurance intermediaries.”