23/07/2010

By Graham Buck

Aon Corporation has revived the controversial issue of contingent commissions for brokers by confirming that it will resume accepting them where “appropriate”.

The group announced that it is “working with the markets to explore the various forms of alternative remuneration available to Aon”.

Steve McGill, chairman and chief executive officer of Aon Risk Solutions, said the group had “conducted a great deal of research around broker compensation across the globe with a focus on serving the needs of our clients and competing on a level playing field in the marketplace.

“As a result, 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.”

He declined to specify which geographical areas or market segments would be included in the compensation structure, or when the changes would be introduced. Aon was working with insurers and clients “to start bringing this strategy to life” and remained committed to transparency of compensation and disclosure that “meets or exceeds all legal requirements.”

In 2005, the world’s major brokers agreed to give up contingent payments after former New York state attorney general Eliot Spitzer mounted a campaign against them. The agreement saw them adopt new business practices and pay more than $1 billion in total client restitution to settle allegations that they steered business to insurers paying the highest contingent commissions.

In February this year Aon and main rivals Marsh and Willis reached agreements with US state authorities to lift the five-year ban and the rigorous disclosure requirements contained in their 2005 settlement agreements.

Willis quickly responded to Aon’s announcement, which it attacked as “a troublesome and ambiguous position on contingent commissions”. It claimed that “Willis now stands as the world’s only insurance broker to refuse to accept contingents in its retail business”.

Marsh already confirmed in March that although its large and middle-market operations in the U.S. and Canadian businesses wouldn't take the payments, it would resume accepting contingents elsewhere.