Earlier this year, several states including New York reversed a 5-year-old settlement that forbade some of the nation's top insurance brokers from taking hidden commissions — private fees that insurance companies send to the brokers to steer the most profitable clients their way.
The fees can bring the nation's biggest brokers hundreds of millions of dollars a year in extra revenue. Several of the largest brokers say they won't bring back the hidden fees, but others could and thousands of smaller insurance agents nationwide already accept them, including many in Tennessee.
Now, New York's decision to remove legal roadblocks and once again allow hidden fees for the biggest brokers in the U.S. has touched off a national debate between those who think it's perfectly fine to take such back-door commissions and those who refuse to do it.
Under revised rules, the nation's biggest brokers, Marsh, Aon Corp. and Willis Group Holdings, which control more than 60 percent of the insurance brokerage market, have to disclose commissions to clients only if they ask about it.
But the companies themselves are taking different approaches to the looser rules — each trying to brand itself as doing what's best for customers.
Willis, which employs more than 630 people in Nashville, has said it won't take the commissions worldwide, despite the more lenient rules. Willis' executives say taking the money — known as contingent commissions — works against a customer's best interests.
A Willis competitor, Marsh Insurance, has also jumped on board and says it won't take contingent commissions, either.
Others, however, have disclosed that they will take commissions. Arthur J. Gallagher & Co. told shareholders in its annual report that it expects to make $10 million in annual revenues from the commissions by 2011, a tiny fraction of its 2009 revenues of $1.7 billion.
(2 of 2)Hard Times for HOAs Could Mean Fewer Home Sales Due to Delinquent FeesDo-it-yourself investors avoid brokers
