Willis does U-turn on contingent commissions

Broking group Willis will start accepting contingent commissions on employee benefits business from 1 April.

The decision marks a break from the past, as Willis had previously stated its opposition to contingent commissions.

“This is a necessary move to ensure [Willis’s] competitive position,” the company said in a statement accompanying its 2011 results.

Willis has been a fierce opponent of contingent commissions in its retail broking business. In 2010 it launched an online campaign against the payments called “Clients Before Contingents”.

Contingent commissions are sums paid by insurers to brokers based on how much business the broker places with the insurer in question. They are controversial because they create a conflict of interest – a broker’s decision about where to place business could potentially be driven by the contingent payments rather than client considerations.

Willis said that it had initially resisted accepting contingent commissions on employee benefits business. The broker told clients in July 2011 that a  significant number of employee benefits insurers had changed  their standard broker compensation to tiers based on volume while continuing to pay brokers traditional contingent commissions.

In response Willis said it would accept the standard volume-based payments but continue to eschew the contingents and bonus payments.

However, it has now changed its mind. “After several months of review under changing market conditions, the company has concluded that it cannot be fully competitive on employee benefits business if it continues to refuse these legal forms of compensation,” the company said.

The news comes as Willis’s net profit halved to $219m in 2011 from $455m in 2010.