Marsh, Aon and Willis to ditch “contingent commission” ban
Aon, Marsh and Wilis are lobbying US regulators to overturn the 2005 ban on them receiving contingent commission, claiming smaller brokers who receive these top-ups have an advantage, Reuters reports.
Contingent commissions are paid for how much business overall a broker brings to an insurer and how profitable it is.
"We are sensitive to the need for a level playing field, so companies are treated equally," Connecticut attorney general Richard Blumenthal said.
Eliot Spitzer’s ban
Blumenthal was one of the lawmakers, with the then New York Attorney General Eliot Spitzer, who introduced the ban.
Spitzer's investigation alleged that some Marsh brokers were giving business to certain insurers because of the over-riding commission the firm would get.
Since the ban, brokers have called for rules that are consistent for all brokers.
Gallagher gets extra $10m
Arthur J. Gallagher, the fourth largest broker, negotiated an end to its own ban in October, claiming that will add $10m to its income.
Blumenthal said discussions are taking place with the attorneys general of New York and Illinois, regulators and the brokers, over "various options under consideration that level the playing field".
Blumenthal hoped for a solution before the end of the year. He said, "We are mindful of the need to protect consumer interests."
Marsh could get $254m
Barclays Capital analyst Jay Gelb estimated that the commissions could add $254m in annual revenue for Marsh, $51m for Aon, and $40m for Willis.
Marsh earned $845m in contingent commissions in 2003, out of $11.6bn in revenue.
The New York State Insurance Department’s proposals on commission disclosure could help.
Terry Fleming, vice president and director of finance at the Risk and Insurance Management Society, said: "If the broker doesn't have to disclose this information then the buyer doesn't get all the information."
