Airmic restates position on contingents after blast from Plumeri

The outgoing Willis chairman Joe Plumeri has made a strong attack on brokers receiving contingent commissions from underwriters – a practice that is widely agreed to be creeping back into the market.

“Clients don’t seem to be rising up and yelling foul over these practices,”  Plumeri told the FT. “It blows my mind.”

“The whole industry can now accept contingent compensation as long as you tell clients that you take them – without necessarily enumerating exactly how much that is. I think that is crazy.

“[Brokers] are getting paid if an insurance company makes more money, and the way you can make more money is if they don’t pay a claim. And your whole idea [as a broker] is to get your client’s claim paid. That’s a conflict – and it’s legal.”

He said contingent commissions were returning to levels previously before the clampdown led by former New York attorney-general Eliot Spitzer.

Airmic chief executive John Hurrell responded that the extent of contingent commissions is “between non-existent and minuscule” at the Airmic end of the market.

“We go back to our members twice a year about what’s going on in the market place and there is a high satisfaction level,” he said.

He suspected, however, that such payments may be more widespread in the middle or small commercial insurance market.

The North American risk management association RIMS has confirmed that the practice is returning to the market, describing it as “an increasing concern.” Airmic would like to hear from any member who believes they are paying contingent commissions.

Joe Plumeri – described situation as “crazy”

John Hurrell believes contingent commissions are exceedingly rare in the Airmic market