Posted on 22 Jul 2010
Willis Group Holdings, the global insurance broker, issued the following statement today in immediate response to the announcement by Aon Corporation that it would resume accepting contingent commissions "where appropriate and legally permissible":
With Aon retreating to a troublesome and ambiguous position on contingent commissions, Willis now stands as the world’s only insurance broker to refuse to accept contingents in its retail business. Aon’s overdue and muted announcement, floated in mid-summer, should come as a wake-up call to all risk managers and buyers of insurance to re-evaluate whether their broker really works for them, or the insurance carrier. Offering opaque statements about doing what is “legally permissible,” another competitor has opted to put contingents before principle. Willis puts clients before contingents.
What buyer of insurance would take comfort in their broker adopting a minimum standard of what’s “legally permissible” to define their relationship? Who is really convinced that taking back door payments from carriers at the end of a year based on profitability and growth of a book of business is an example of, as Aon’s Steve McGill says in the company’s news release, “doing what is right to serve the best interests of our clients”? Clients’ best interests are served when their brokers work for them, and only them, with standards of service based on ethics and integrity, not merely on what’s “legally permissible.”
Indeed, Aon’s announcement this week flies directly in the face of what clients want from their brokers. In a brand new poll of commercial insurance buyers released by Business Insurance magazine on July 19, 70 percent of buyers said continent commissions represent a conflict of interest. This is what we have been saying all along: a retail broker cannot serve two masters. They either represent the client or the carrier, but they can’t do both.
Willis’ stand is unwavering on the matter of contingent commissions and is clearly spelled out on www.ClientsBeforeContingents.com, our web site devoted to this issue. On the site is a full archive of commentary about the issue and tools for risk managers to take action and demand true transparency from their brokers. Also on the site is a White Paper, written by the respected international law firm Edwards Angell Palmer & Dodge, on contingent compensation. The White Paper, which was broadly quoted in news stories this week, states clearly that “A regulatory arrangement built around minimum disclosure requirements tends to result in just that: minimum disclosure.”
The recent history of broker behavior and regulatory oversight in the insurance industry is not a proud one. The permissive rules that have fostered rampant conflicts of interest have returned and, with them, an industry environment that’s headed deeper into a morass and bound for more trouble when “legally permissible” is the new standard of excellence. Our industry can do much better by its clients, and clients should demand better from their brokers.