Willis’ larger-than-life CEO Joe Plumeri ignited a war of words in the US last week over the use of contingent commissions.
As the keynote speaker at last week’s Risk & Insurance Management Society (RIMS) conference in Philadelphia, Plumeri complained that some brokers were continuing to charge contingent commissions despite Willis’ decision last year to end them.
“Why is my cholesterol bad but for the others it’s good? It doesn’t matter whether the broker is global, regional or local based in the US, London or anywhere else around the world. It’s time to say: enough. Contingent commissions. Over. Done. Finished,” he exclaimed.
Willis – together with its global competitors Marsh and Aon – are frustrated that some brokers are continuing to charge insurers these fees despite their decision to abolish them in the wake of the New York attorney general’s investigations into their business practices.
Following Willis’ settlement with Eliot Spitzer earlier this month, all three broking giants have now agreed to establish restitution packages to compensate all their US clients whose accounts may have been subject to these overriders.
But some smaller brokers argue that just because their larger peers abused the practice, it does not mean they should also stop charging them.
“One mega-broker’s experience should not be extended to pontifications regarding the entire industry,” complained Leonard Brevik, the executive vice-president and chief executive of the National Association of Professional Insurance Agents, which represents independent insurance agents.
Predictably, Brevik honed in on Willis’ recent settlement that involved suggestions of malpractice including steering and bid-rigging. “This is a hypocritical suggestion, in that it comes from the chief executive of the third-largest insurance broker in the US a firm that earlier this month agreed to pay $50mn in restitution to policyholders to resolve concerns about anti-competitive practices involving incentive fees in property and casualty insurance sales,” he continued.
Riding to Plumeri’s rescue, however, was the Council of Insurance Agents and Brokers (CIAB) who objected to Brevik’s criticisms and choice of language. “We take issue with PIA’s attack on a prominent leader in the brokerage business. Inflammatory words such as ‘dubious’ and ‘hypocritical’ are wrong and misguided,” exclaimed CIAB’s president Ken Crerar.
He continued: “PIA is missing the point entirely - full and complete compensation transparency by insurance producers. Clients deserve it and many are demanding it. The regulatory inquisition of recent months is leading us inexorably to that industry standard.
“Yet PIA and others seem to think that transparency is good only for some commercial insurance transactions. The sooner industry groups stop finger-pointing and disparaging one another and support a standard for compensation disclosure - such as the NAIC model law - the more trust we'll earn from consumers, and we can all move on. We have nothing to hide.”