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Chubb Ltd. Chairman and CEO Evan G. Greenberg criticized insurance brokers for “abusive behavior” in the insurer’s 2016 annual report released Wednesday and warned of consequences.
In his letter to shareholders, Mr. Greenberg says a sign of the soft market is “the abusive behavior on the part of some brokers who enrich themselves at the expense of both their customers and underwriters.”
According to Mr. Greenberg, “cloaked in the mantra of ‘customer best interest’ or ‘treating customers fairly,’ they seek the cheapest price and broadest coverage at commission terms that by any measure are excessive.”
He added, “Forcing underwriters to succumb to the lowest common denominator is hardly in the customer’s, or industry’s, best interest.
“These predatory behaviors, which have shown up around the world, and in London in particular, are simply unsustainable from an underwriting perspective and will come back to haunt these brokers: There will be customer and regulator backlash, or worse. Remember, distribution can be disintermediated.”
While Mr. Greenberg did not elaborate, brokerage commissions —particularly contingent commissions — came under fire in 2004 when then-New York Attorney General Eliot Spitzer began investigating commission arrangements where insurance brokers allegedly steered clients to particular insurers that paid the highest commissions.
Maurice R. Greenberg’s $9 million settlement agreement with New York authorities over alleged fraud brings to a close a case that centered on an arcane area of reinsurance and led to the ouster of one of the global insurance industry’s most iconic leaders.