The three insurance brokers are Marsh Inc. (MMC), Aon Corporation (AOC)and Willis Group Holding (WSH). It has been two years since investigations into their business practices by NY Attorney General Eliot Spitzer resulted in the three having to drop contingency fees. In all the settlement costs totaled over $1 billion and caused damage to their financial strength ratings as well.
Interestingly there are many insurance brokers still receiving contingent commissions creating a situation whereby the three large brokers are having problems growing through acquisition because “firms that accept contingent commissions are no longer a sound buy for those that do not.”
Adding to that problem is the reality that the three brokers have dropped “small, unprofitable accounts that were profitable under the volume-based contingent commission scheme thereby creating sizable market opportunities for smaller brokers.”
Of course the most detrimental long-term damage is the dents in the three brokers reputations. Somehow I don’t think too many people are crying for these companies, least of all myself.
