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Member, Beacon International Group, Ltd.
Although the world's two largest brokerages have not fully denounced supplemental commission programs, neither has accepted them, according to the firms' chief executive officers.
"We've been offered (supplemental commissions) by multiple carriers and we have currently said 'no,"' Greg Case, CEO of Chicago-based Aon Corp., said when asked about the commissions during an analyst conference call last week. "We're never going to do anything to jeopardize trust. In the current form, supplements, as we think about them and as defined...don't meet our standard...of client service and client leadership," he said.
While Marsh has not accepted any supplemental commissions, it continues to study them, a spokesman said. The brokerage, however, will not accept any supplements that are based on volume, profitability or growth, he said.
"Supplemental commissions that are specifically related to volume concerns are not in the best interest to clients or to Marsh," CEO Brian M. Storms of New York-based Marsh Inc. said in an analyst call last week.
In May, Joe Plumeri, chairman and CEO of London-based Willis Group Holdings Ltd., likened supplementals to contingent commissions, which Willis, Marsh and Aon ceased collecting in 2004, and said the brokerage will not be accepting the new form of compensation.
Chubb Corp. and Travelers Cos. Inc. introduced supplemental payments to replace contingent commissions earlier this year following state investigations of broker compensation practices. Hartford Financial Services Group Inc. said it will launch a new supplement commission program in 2008.
Unlike contingents, which are paid after brokers hit volume or profit thresholds with insurers, supplementals are retrospective and provide brokers fixed compensation based on the their prior performance with insurers.