Critics say more brokers starting to accept payments

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Outgoing Willis chief executive Joe Plumeri has once again spoken out against contingent commissions, claiming the industry was “back to where it was before” the Spitzer probe.

Plumeri told the Financial Times he was “astounded” corporate insurance buyers tolerate practices he said create a clear conflict of interest.

John Phelps, the new president of RIMS – the society of global risk managers that represents corporate insurance buyers – has also spoken out.

“Brokers are starting to accept them again. The brokers can engage in this conflict of interest legally … it’s an increasing concern,” he said.

Insurers pay contingent commissions to brokers based on the volume or profitability of business placed with them.

In 2004, former New York attorney-general Eliot Spitzer led an attack on the contingent commission practices in the US, forcing some of the major brokers to stop accepting them.

Regulators agreed to relax the terms for the major brokers in 2010, however.

“Clients don’t seem to be rising up and yelling foul over these practices,” Plumeri said. “It blows my mind.

“The whole industry can now accept contingent compensation as long as you tell clients that you take them – without necessarily enumerating exactly how much that is. I think that is crazy.”

“[Brokers] are getting paid if an insurance company makes more money, and the way you can make more money is if they don’t pay a claim. And your whole idea [as a broker] is to get your client’s claim paid. That’s a conflict – and it’s legal.”

Out of Willis’s global broking rivals, he told the FT: “Marsh does it, Aon does it.”

In response, Aon said: “Our view on transparency and best value for price in the industry is well known. Contingent commissions are not and never have been an important part of our business strategy.”

Marsh said: “Clients care a great deal about the level of transparency and disclosure around their broker’s remuneration, and Marsh believes it leads the industry in these areas. We provide details of how we are paid so that clients can make fully informed insurance-purchasing decisions.”

Last year, Willis began accepting contingent commissions for employee benefits business in the US. The broker argued it had to do so to remain competitive.