Posted on 16 Jul 2009
The world's third-largest insurance broker, Willis Group Holdings Ltd., said compensation rules proposed by a New York regulator doesn't do enough to protect clients from secret payments known as contingent commissions.
“They didn’t call for transparency and they didn’t call for the abolishment of contingents, and I’m saddened by that,” Chief Executive Officer Joseph Plumeri said in an interview. “With all the reform and all the hearings that were done in New York, what basically happened was nothing.”
The New York Insurance Department is reshaping the rules four years after bid-rigging investigations by then-Attorney General Eliot Spitzer saddled the biggest brokers with compensation curbs without similarly burdening smaller middlemen. London-based Willis wants those curbs, which include a ban on contingent payments, extended to the whole industry, while Marsh & McLennan Cos., the world’s second-largest broker, has lobbied for a repeal.
“In Willis’s case, we will continue to be transparent and we will continue to not take contingents,” Plumeri said.
Willis, Marsh & McLennan and Aon Corp., the biggest broker, agreed to stop taking contingents in 2005 and to pay more than $1 billion to settle Spitzer’s probe. Willis’s share of the restitution was $50 million, while New York-based Marsh & McLennan agreed to pay $850 million.
Level Playing Field
Acting New York Insurance Superintendent Kermitt Brooks has said he’s seeking to improve fee disclosure by smaller brokers and “level the playing field” that was upended by Spitzer’s investigations.
The watchdog published draft regulation in January that called on smaller agents to tell clients how much they expected to earn from insurers in contingents. A revision released last week softened the department’s stance by saying disclosure is needed only if asked for by the client.
“That’s disappointing,” Plumeri said of the revision, speaking in a telephone interview from Chicago. The broker is hosting a ceremony today to rename the Sears Tower, the tallest building in the U.S., to Willis Tower.
Willis bought Hilb Rogal & Hobbs Co. of Glen Allen, Virginia, last year for $1.7 billion to expand in the U.S. and take on Marsh & McLennan and Aon. In March, Willis announced a deal to occupy three floors in the Chicago landmark.