Industry achiever Mahoney discusses contingent commissions and the state of the UK market
Aon Global’s ex-chairman Dennis Mahoney launched a scathing attack on former New York attorney-general Elliot Spitzer, accusing him of “blackmail by legal means”, at the Insurance Times Broker Forum last week.
During a question and answer session with RSA commercial managing director Paul Donaldson, Mahoney said Spitzer’s civil lawsuit against brokers in 2004 wreaked long-term damage on the industry.
Mahoney, who won the Insurance Times Industry Achiever of the Year Award in Birmingham on Friday, said that while the practice of contingent commissions had been established for over a hundred years in the US market, Spitzer manipulated a legal statute to attack the industry.
“The attorney-general took advantage of the Martin Act, which effectively meant that if you put up resistance, your firm it would be in serious jeopardy,” he explained.
“The whole Spitzer era is increasingly looking like McCarthyism to me. It was blackmail by legal means in my view, and I think it was wrong,” he said. But he pointed out that a number of legal cases had recently revalidated the practice of contingent commissions.
When asked by Donaldson how London could retain its leading position in the global marketplace, Mahoney said the government needed to prevent a future brain drain from the UK with competitive tax rates and a greater appreciation of existing talent.
“If this government drives this intellectual capital out, it will suffer … and relatively speaking you will see other markets grow more.”
He added that the success of the UK market would also be affected by the country’s ageing population and inadequate education system.
“We are not producing the number of graduates in math and engineering that we should if we want the country to be successful.”
Both Donaldson and Mahoney shared concern the public was increasingly viewing insurers in the same light as the banking sector following the financial crisis.
“I think we need to do a better job in distancing ourselves from the banks,” Mahoney said.