Marsh Rejects Contingent Commissions

Insurance brokerage Marsh said its core U.S. brokerage operations will not accept contingent commissions from insurance companies for any coverage it arranges for U.S. clients, making it the third of the big brokers to take that position.

In February, regulators from three states freed the major brokers--Marsh, Aon and Willis--from a 2005 agreement that barred them from accepting such commissions, which insurance companies pay brokers to reward them for business. The regulators said they were leveling the playing field, since only the big brokers had been barred from accepting contingent commissions and not their smaller competitors. Aon and Willis said at the time that they did not intend to accept contingent commissions.

The Risk and Insurance Management Society (RIMS) applauded Marsh's decision and reiterated its position that such commissions "impose an inherent conflict of interests upon the insurance buying transaction."

In its announcement, Marsh said the Marsh & McLennan Agency LLC and some businesses within Marsh Consumer will accept contingent commissions, and the company as a whole will accept enhanced commissions and fees. Marsh noted that enhanced commissions and fees involve specific services that Marsh provides to insurance companies and do not reflect insurance volume.

Separately, in a letter to its clients, Marsh said its decision was not a judgment on the "propriety" of accepting such commissions, since they are legal in all U.S. states. "We do this in response to concerns raised by our clients and because we believe that we can be fairly compensated in this segment without them," said the letter.

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