It was widely reported this week that insurance broker Marsh & McLennan Cos. is attempting to amend its landmark 2004 settlement with insurance regulators and the New York State Attorney General’s Office that required it to give up so-called contingent commissions.
Marsh entered into the 2004 agreement to settle charges that it fixed bids in order to steer business to favored insurers through the use of contingent commissions. While Marsh does not seek reinstatement of those types of commissions, the new amendment, if approved, would allow Marsh to accept payment from insurers for certain services it provides to customers. One example given by Michael G. Cherkasky, the firm’s chief executive, are engineering reports that Marsh prepares to aid insurers determine the proper price to charge for insurance. Cherkasky stated that although Marsh routinely performs such work, it cannot charge for it under the 2004 agreement. The proposed amendment would also allow Marsh to charge insurers fees for completing paperwork on their behalf when Marsh has to perform the work manually.
If approved, this would be the second time that the 2004 agreement has been amended. It was previously changed in August 2006 to allow Marsh to accept commissions from insurers when it worked on their behalf as a managing general agent or underwriting manager. Marsh brokerage unit Chief Executive Brian Storms stated in Marsh’s second quarter earnings conference call on Tuesday that he expects a deal amending the agreement to be finalized soon. Neither Aon nor Willis have stated that they have similar deals in the works. We will post updates to this situation as developments arise.