After completing a review of the supplemental compensation plans recently proposed in the marketplace, Willis group has said it will not be accepting these incentive arrangements.
According to Willis, the supplemental compensation plans, as currently proposed, do not avoid the conflicts that were associated with contingent commissions. Such supplemental compensation plans are best housed in an agency relationship, says Willis.
“As currently designed, the proposals do not afford a conflict-free environment for the client and we are not going to take them,” said Joe Plumeri, chairman and chief executive officer of Willis. “It's not about being allowed to take them because a government authority or industry regulator says we can take them. For Willis, it's about making a principles-based decision because it's the right thing to do and is consistent with our Client Advocacy model. The proposals we have considered are based on ‘if-then' equations and it does not matter whether the math is done on a prospective or retrospective basis; either way, we view these as contingents.”
In his address to the UK's Financial Services Authority at the Annual Insurance Sector Conference on 21 March, 2007, Joe Plumeri spoke about the importance of embracing a principles-based approach to regulation and to running the entire insurance industry: “The outcome of a principles-based approach, practiced globally and with regulatory flexibility, will be that clients have confidence and faith in the industry – and that is a must for everyone involved.”
Willis says the decision not to accept the currently proposed supplemental compensation is consistent with the principles-based approach to regulation espoused by the FSA.
