By STEVE TUCKEY, who has written on insurance issues for a decade for several national media outlets
Don Bailey, chairman and CEO, Willis HRH, said the challenge now remains for the combined entity to plan for the replacement of those revenues.
"It is a matter simply of, instead of taking an up-front commission of 10 percent and contingent and supplemental of 3 percent to 5 percent, to just take an up-front of say 13 percent to 14 percent," said Bailey.
Contingent commissions represent a variable payment based on current-year performance as defined by the carrier, while supplementals are a fixed payment based on the prior year. Willis continues to oppose both payments, although the N.Y. contingency ban permits supplemental payments.
Bailey said Willis is in the process of negotiating overall higher commissions across all product lines to cope with the ramifications of the soft market.
"Those discussions are at various stages, but I would characterize them as positive, and we are making good traction on this front," he said.
Bailey discounted any possibility that varying commission levels paid by carriers will raise so-called "best interests" concerns from clients.
Terming Willis "one of the few brokers committed to being completely transparent," he said that clients will at the end of the day choose carriers "based on the range of factors we present to them."
NEW FRAMEWORK FROM REGULATORS
Meanwhile, New York Insurance Department Spokesman Andrew Mais said regulators are developing a new framework for brokerage compensation that could be ready for comment early next year.
But any alteration to the current ban on collecting contingent commissions by Marsh, Aon and Willis would also have to be signed off on by the Securities and Exchange Commission and the New York Attorney General's office.
Bailey said he hopes that contingency fees are eliminated altogether so that all firms can be placed on an equal footing in the marketplace.
February 10, 2009
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