Willis joins Aon in commission battle

Willis has become the latest broker to push for commission increases, attempting a new 1.5% charge paid by some underwriters on London placements.

Insurance Times understands Willis has been attempting the increases with underwriters in global property.

Sources said the new charge was being “fiercely resisted” by underwriters, and comes hot on the heels of Aon’s attempts to impose a new 3.5% commission fee on London market placements.

Willis has been pushing for the new charges for around four to six weeks, Insurance Times understands.

Why and how?

The additional charge is likely to be driven by two factors: the continuing soft market and the high costs transacting London market business.

Willis refused to comment, but referred Insurance Times to the company document: 'How we get paid'.

Under the London market section, the document reveals how Willis is having to cope with increased costs in regulation, accounting and support functions.

The document says: “Willis is implementing a programme to add Subscription Market Brokerage in some of its core specialty businesses, placing business into the subscription markets, predominantly placed in London.

“The principles underlying this Subscription Market Brokerage programme include the following: “Willis is required to handle increased infrastructure costs such as those arising from presentations to and negotiations with multiple entities in the subscription market.

“Willis performs additional administrative, regulatory, accounting and support functions in order to complete subscription market placements. These functions benefit our clients and insurers.

“Working groups of underwriters in the subscription market recognise these additional costs and agree that a negotiated percentage of the premium to account for these costs is appropriate and helps assure competitive access to that market.

“Willis believes that the best way to defray the cost of these functions is through this brokerage. Subscription Market Brokerage is fully disclosed to our retail insurance brokerage clients.

“This subscription market brokerage has no relevance to our activities in our North American Retail Business.”

'You are going to hear about a plan'

The news comes as Willis is seeking to grow aggressively.

Willis chief executive Joe Plumeri, at the fourth-quarter results briefing, explained the challenges faced in the continuing soft market.

But Plumeri said Willis was intent on pursuing “aggressive” growth in improving margins in 2011.

Plumeri said: "Turning to 2011, we are always looking ahead, and we are always looking to the future. You are going to hear about a plan. You are going to hear about us aggressively significantly growing our margins and our earnings per share.”

How far will Willis go?

Willis challenges are similar to those faced by its two nearest rivals, Aon and Marsh.

Aon has responded with its 3.5% commission as part of the Aon carrier charge, where underwriters pay the commission on top of the standard arrangements.

Aon is also attempting to sign underwriters up to GRIP, its information database that supplies in-depth information to help underwriters on specific lines of business.

GRIP uses data handed over by clients to Aon. Some clients have become concerned, and last year, Deutsche Bank asked to be taken off the GRIP.

Marsh has spent the past year rolling out its own information database, MarshConnect.

It remains to be seen to what extent it will follow its competitors and try to squeeze London market carriers for extra revenue.