Aon To Take From Insurers Commissions Once Banned Under Spitzer
July 21 2010 - 12:32PM
Dow Jones News
Aon Corp. (AON), one of the world's leading insurance brokers,
said Wednesday it will accept a controversial form of compensation
from insurance companies under some circumstances.
Aon joins rival Marsh & McLennan Cos. (MMC) in deciding to
accept contingent commissions--with some self-imposed
restrictions--after New York's insurance regulator allowed the
practice earlier this year. The two firms, along with smaller rival
Willis Group Holdings Plc (WSH), had been banned from accepting
them after former state attorney general Eliot Spitzer mounted a
campaign against the payments in 2004.
Brokers match the companies that buy insurance with the sellers
of the coverage, and since the contingents were banned the three
brokers have been paid only by the buyers. Smaller brokers such as
Brown & Brown Inc. (BRO) have continued to take the commissions
from insurers, which can be linked to factors including how
profitable the policy is for the insurance company.
Spitzer had argued the contingent payments amounted to secret
kickbacks, and the companies agreed to stop accepting them in 2005
in a settlement with the then-New York attorney general that
applied worldwide. Under an agreement reached with New York
regulators in February, the three leading brokers agreed to
disclose the fees to their clients as a condition of the lifting of
the ban.
But Willis has said it will continue to forgo contingent
commissions, and argued that the payments raise the question of
whether the broker is acting in the best interest of its clients.
Marsh & McLennan said in March its large and middle-market
operations in the U.S. and Canadian businesses wouldn't take the
payments, but it would accept contingents elsewhere.
Aon wasn't as specific in a statement released Wednesday.
"We have decided to accept various forms of compensation
available, which may include supplemental and/or contingent
commissions in the geographies and client segments globally where
appropriate and legally permissible," said Steve McGill, chairman
and chief executive of Aon Risk Solutions.
Alan Devlin, and analyst for Atlantic Equities in London, said
in a note to clients that Aon accepted about $200 million of
contingents annually "at its peak," while Marsh & McLennan took
about $800 million before Spitzer took action against the
payments.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;
erik.holm@dowjones.com
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