| London brokers rethink commission structures
By Paul Cummins FCCA AITI MSc.Multimedia Systems 22 October 2004
Financial Services Regulation- Insurance Industry
It was reported in the Financial Times on 28 October that some London based insurance brokers would rethink their commission structures and withdraw from the use of contingent commissions from insurers as the fall-out from New York State attorney general Eliot Spitzer's investigation into the US insurance industry widened to the UK. The two brokers quoted are Jardin LLoyd Thompson and Heath Lambert.
The following is a quote from the press release of Jardin http://www.jltgroup.com following the Eliot Spitzer move.
"JARDINE LLOYD THOMPSON GROUP PLC STATEMENT REGARDING NEW YORK
ATTORNEY GENERAL COMPLAINT AGAINST MARSH & MCLENNAN
Jardine Lloyd Thompson Group plc ("JLT"), commenting on the complaint filed in New
York by the Attorney General against Marsh & McLennan ("Marsh") yesterday, states:-
JLT has not been approached by the New York Attorney General's office in relation to this
investigation, or any other matter.
The Attorney General yesterday commenced legal proceedings against Marsh based on
allegations of market rigging, providing fictitious quotes, fraud, illegal conduct and other
matters. JLT's internal policies and procedures clearly prohibit such practices.
JLT's business model revolves around acting in the best interests of its clients and putting
client's interests first. JLT's business protocols clearly outline to clients the basis of JLT's
remuneration and, as a matter of routine, JLT also responds directly to client's requests
should they require more detailed information."
There is a new graphic on the website http://www.metaphorbusinessgraphics.com in the Financial Services Regulation section,depicting Eliot Spitzer reprimanding Marsh & McLennan.
It is suggested in the Financial Times that contingent commission represents only 2.5% of turnover in Jardine and 0.5% of turnover in Heath Lambert.
Clearly the Eliot Spitzer initiative coupled with the reported visit by John Tiner, Chairman of the UK FSA, to New York to meet Mr. Spitzer will lead to other brokers and insurers in the UK and Ireland rethinking their commission stuctures.