Posted on 30 Oct 2009
One of the biggest insurance brokers said Thursday it won't accept commissions from insurers that are based on how much business they bring in.
The so-called contingent commissions, which the biggest brokers have been barred from accepting for years, "remain a major source of conflict," said Joe Plumeri, chairman and chief executive officer of Willis Group Holdings Ltd. (WSH), the third-largest broker.
He made the remarks at a breakfast meeting of the Executives Club here.
Brokers earn the commissions from insurance carriers for steering business their way, not "on the value of the service that they provide to their clients," Plumeri said.
He said the broker would hold a transparent standard, which he said creates an atmosphere of trust. Currently there is no set of rules for how brokers must reveal commissions.
Brokers may be on the verge of being allowed the commissions again as New York's top insurance regulator considers issuing a regulation that would allow big brokers to take them under certain conditions.
The three largest brokers can't accept contingent commissions now. The fourth largest broker, Arthur J. Gallagher (AJG) was recently allowed to resume taking the commissions by the Illinois Insurance Department.
The largest brokers gave up the commissions after a 2004 investigation by former New York Attorney General Eliot Spitzer. He, and many corporate risk managers, argued that the commissions created a conflict of interest for brokers, who may be paid both by insurers and the policyholders.