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Attorney generals tell insurers to stop contingent commissions

Three US state attorney generals have written to (re)insurers telling them that they must end special commissions to agents and brokers as agreed in an earlier settlement.

New York’s Eliot Spitzer sent the letter, which was co-signed by Connecticut’s Richard Blumenthal and Illinois’ Lisa Madigan, to ACE Group, American International Group, St Paul Travlers and Zurich American Insurance.

The letter reminded the companies that their earlier agreements required them to change the way they pay brokers and agents in any type of insurance where more than 65 percent of the cover is sold by companies that do not pay contingent commissions.

Spitzer said a “tipping point” had now been reached in lines including motor, homeowner, boiler and machinery and financial guarantee.

Robert Rusbuldt, chief executive of the Independent Insurance Agents & Brokers of America responded: “All of the illegal activities involved big, commercial lines. Here you have personal lines agencies - auto and homeowners - being penalised for the sins of others.”

He added: “The independent agent and broker community is greatly distressed by this development. These carriers are now unable to use what otherwise is a perfectly legal way to compensate their sales forces, just as is done in virtually all industries across America.”

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