What differentiates the latest agreement from MMCs and Aons, according to Joe Plumeri, chairman and CEO of Willis, is that unlike the other two major brokers, Willis was not sued over questions of impropriety and did not have to apologize for the misbehavior of a few.

During a conference call the day the settlement was announced, Mr. Plumeri said the agreement indicated there was no willful violation of the law. He said there are some disagreements over the characterization of certain acts by Willis executives in the settlement but, under the agreement, he was prohibited from contradicting them.

“While these investigations have created turmoil in the industry, I think they serve as a catalyst for positive change,” he continued.

He said Willis had implemented many of the business reforms directed by the agreement, which was also noted by the attorney general and the New York insurance department. Unlike its competitors, he said Willis returned more than $8 million in contingent commissions after the firm announced in October that it would no longer accept them.

In response to a question about a prohibition on contingent commissions throughout the insurance industry, Mr. Plumeri said there should be one. “The answer to your question is that I hope [all types of contingency fees] are banned by every state insurance commissioner, for every company,” he said, “and I am going to do everything I can to see that happens.”

“I think that there is a lot that needs to be done,” he added. “[Willis] certainly needed to do some things. We have done them, and continue to do them, and we are going to try to get better. I think the industry has got to get better.”

He said that “contingents are props. It doesn't distinguish who your client is and it takes away creativity in the industry. It makes you less ready for your game. It makes you less ready to take care of your clients because there are other ways to get paid. I think the client would be better off if we concentrate on doing what is best for the client [by] being creative and imaginative and showing the value that we should.”

For his part, Mr. Spitzer said Willis had “moved quickly to remedy its problems. Its actions will help bring about greater transparency and accountability in the insurance industry.” He added that Mr. Plumeri “has demonstrated admirable leadership in spearheading Willis' response to the issues raised in our investigation and in implementing reforms at the company.”

Superintendent Mills added that “Willis has rightfully agreed to undertake a broad range of substantive business reforms which will benefit consumers by providing more disclosure to them about the services they are receiving. The corporate governance initiatives codified in the settlement will also ensure these changes are instituted appropriately.”

The officials said they had begun a joint investigation of Willis last spring as part of a broad examination of contingent commissions and the steering of insurance contracts by insurance brokers. The probe of Willis revealed internal communications about efforts to maximize revenues “without regard to the interest of clients,” they said.

The officials noted that in an October 2003 e-mail to Willis' regional marketing officers, titled “Contingent Income Push,” James Drinkwater, managing director of Willis Global Markets, wrote: “I need you to drive this initiativeI want to see you directing the flow of business to these companies,” and then named the insurers agreeing to offer contingency fees to Willis.

The officials said their investigation led to the Assurance of Discontinuance, which spells out the details of the settlement. Willis admitted no guilt, and its purpose is to resolve issues raised by investigations by both the attorney general and insurance department, the parties said.

The AOD states that prior to modifying its business model, Willis steered customers to preferred “Partner” carriers that signed contingency deals, and sent client business through its wholesaler, Stewart Smith, to inflate commissions when it could have placed the business directly. (Willis last week completed its sale of Stewart Smith to American Wholesale Insurance Group.)

The settlement also noted a Willis communication explaining that insurers needed to understand that fee agreements were a reward for services that included providing “an unfair competitive advantage.” Another portion of the document noted an internal Willis report stating special attention was being paid to “St. Paul, Chubb, Liberty Mutual, Hartford and Crum & Foster due to special [contingency] agreements.”

The agreement only applies to Willis North Americaa division of Willis Group Holdings headquartered in London.

A statement from Mr. Hatch quoted Mr. Plumeri as saying the brokerage is pleased to have resolved Minnesota's investigation, and that it has addressed Mr. Hatch's concerns. His statement also noted that Willis was the first major broker to stop taking contingency fees.

The settlement is the third of its kind that New York authorities have made with large brokerage firms. Previously, Marsh & McLennan Inc.the parent of Marsh Inc.agreed to repay clients $850 million and Aon agreed to repay $190 million, while changing their standard business practices.

Marsh was accused in a civil suit of bid-rigging, price-fixing and steering customers to insurers that cooperated with its scheme and made payoffs to Marsh in the form of incentive fees and placement agreements.

New York officials noted that the wide-ranging probe is continuing. To date, 10 executives from four companies have pleaded guilty to criminal charges stemming from the investigation.

Reproduced from National Underwriter Edition, April 15, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.