Market rejects brokers' plan to charge higher fees

Underwriters in the Lloyd's and London market have told both Aon and Marsh to "go back to the drawing board" over the brokers' efforts to charge the market higher fees.

Market sources said that Aon's service fee card had caused "bad blood" among many of the Lloyd's managing agents and they had rejected the first proposal.

One source said: "Aon has wielded its powerful position for years. The market has decided to send out a message that enough is enough by standing up to Aon in force."

The service fee card was rolled out in January detailing the amount Aon will now charge for the services it traditionally performed for underwriters in the London subscription market. The fees range from 3.7% to 5% depending on the type of work supplied.

It is also believed Marsh UK's business plan, which hinges on the broker charging higher fees for services, has been delayed until March while it tries to negotiate with underwriters on specific terms.

The broker needs the higher fees to recoup the income lost through its decision to scrap contingent commissions since the Spitzer inquiry. It also has to satisfy shareholders that it has a workable model after agreeing to pay its $850m settlement to the New York Attorney General over four years which will impact heavily on its results in March.

Last week, Marsh called reports that the company was ready to shed another 7,000 jobs globally, "ridiculous".

A Marsh spokesman said in regard to the business plan: "We continue to engage in active discussions with the aim of maximising the value our clients derive from the insurance marketplace."

An Aon spokeswoman said: "We are still in negotiations with the market but so far have received positive feedback about the proposals."