As the memory of Spitzer fades, commissions are back in the spotlight

Arguments about consolidators’ commissions are so 2008. This year, it’s all about the big boys fighting back – with Aon and Marsh leading the charge. With Spitzer becoming an ever more distant memory and the economic pressure on to safeguard revenues, expect the world’s leading brokers to use their firepower.

The Spitzer agreements, which the major brokers struck in the US in early 2005 – will expire next year, meaning remuneration structures are coming back into the spotlight. While “contingent commissions” remains a dirty phrase, new and more sophisticated models of remuneration from insurer to broker are being developed in the US – and the UK will follow suit.

For example, Marsh is believed to have struck a deal with AIG whereby an additional 1% commission will be paid on all US business it places with the insurer. And Willis has launched a dedicated global placement unit that will evaluate its relationships with carriers across continents. It has emphatically said this is not the precursor to a return to contingent commissions – but it does demonstrate a structured and strategic approach to placement that may well have ramifications for remuneration.

Like all firms, the major brokers are under pressure to increase their margins. With their clout, the spats between insurers and consolidators will soon seem like child’s play. Insurers may win that round – but they will soon have much bigger problems to deal with.