Marsh Refuses to Accept Contingent Commissions

Insurance broker Marsh says its main brokerage unit will not accept contingent commissions on business for U.S. or Canadian clients but its Marsh & McLennan Agency and its affinity and personal lines business units will.

The decision to not accept contingent commissions in its core brokerage operations aligns Marsh with its two biggest competitors, Aon and Willis, which have also said they will not accept them, although each is using different language. Willis has abolished them, Marsh has rejected them and Aon has said it has no current plans to accept them.

The three largest brokerages had been banned from accepting contingent commissions since January, 2005 but in February officials in New York, Illinois and Connecticut lifted that ban, which raised the possibility the big three firms would return to the practice.

The states’ decision to lift the ban came in conjunction with the issuance by the New York insurance department of a new regulation requiring all producers regardless of size to disclose their compensation to customers when asked. Aon, Marsh and Willis have all agreed to honor the New York disclosure standards.

“Marsh will not accept contingent commissions on any placements for any U.S. clients served by the firm’s core broking operations. The firm will continue to provide detailed transactional disclosure to clients in its core brokerage operations, including all quotes received and compensation information,” the firm said in its announcement.

Marsh is taking a “client by client” approach on contingent income on business outside of the U.S. and Canada, according to Dan Prince, global marketing director for Marsh.

While Marsh’s core brokerage unit will refrain from accepting contingent commissions, its fast-growing middle market retail agency operation – Marsh & McLennan Agency – and its affinity and personal lines units will accept them. Middle market agencies were never banned from accepting them.

Marsh also said it will continue to collect “enhanced commissions and fees” for services from insurers with respect to its core broking operations. These types of compensation are fixed in advance of insurance transactions and are not related to volume, retention, growth or profitability.

Topics USA New York Agencies