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Member, Beacon International Group, Ltd.
The insurance industry is poised to see heightened disclosure regarding interest earned by brokers on client premiums.
"To the extent there has not been disclosure, as a result of (the Risk & Insurance Management Society Inc.'s) concern and or position on this matter, we will begin to see brokers disclose that they may earn interest income (from) fiduciary funds received from the client awaiting transmission to the insurance company," said Timothy J. Cunningham, a principal with OPTIS Partners L.L.C. in Chicago.
Some are already doing it; according to a spokesman for New York-based Marsh & McLennan Cos. Inc.
Since 2005 as part of its annual disclosure process, MMC has been telling U.S. clients the aggregate amount of investment income earned by the brokerage on premiums it held on behalf of insurers. MMC also notes in its client agreements that it invests and retains the investment income on the premium payment funds it receives from clients prior to remitting them to the insurer, the spokesman said.
At broker Willis Group Holdings Ltd., "It's not disclosed, but I think it should be described and defined, because the question has come up legitimately," said Joe Plumeri, chairman and chief executive officer of Willis. "Very, very shortly we will be defining what we do, why we do it and how we do it. I think people are under the impression that we get money and we keep it for 60 or 90 days just for the purposes of float. We do not do that," Mr. Plumeri said.
Chicago-based Aon Corp. is "open to have a dialogue" and "engage in conversations that clients might wish to begin" about the issue of interest earned on client premiums, a spokesman said.
While compensation disclosure procedures at Atlanta-based Beecher Carlson Holdings Inc. do not automatically include fiduciary investment income, "we'll give viability to the client on that," said Tom Golub, president and CEO.