Mr. Rusbult's comments followed an earlier denunciation by Michael D'Arelli, vice president of legislative and regulatory affairs for the Western Insurance Agents Association, who said big insurers with such agreements were “throwing producers under the bus.”

The comments followed Monday's announcement that St. Paul Traveler's had reached a $77 million settlement with attorney generals in New York, Connecticut and Illinois.

Provisions of the agreement, which follow similar arrangements made by American International Group, Zurich and ACE call for the insurer to:

o Discontinue paying contingent commissions on excess casualty coverage in the United States through 2008

o Discontinue paying contingent commissions on any line of business if 65 percent of the U.S. market for that line pays no commission or signs an agreement not to do so.

o Agrees to support legislation and regulations in the United States to abolish contingent compensation for insurance products or lines

o Agrees to support laws and rules requiring greater disclosure of compensation.

According to Mr. D'Arelli, “it is completely legal to pay contingent compensation–it's a lawful business practice. Unfortunately that legitimate practice has been tainted.”

According to charges leveled by investigators, contingent compensation payments by insurers have served as kickbacks to reward big brokers involved in a system that rigged bids and steered commercial accounts to cooperating insurers.

Mr. D'Arelli said he agreed that “bad actors” should have to pay fines and penalties, but that attorneys general by requiring an end to contingent commissions were “throwing the baby out with the bath water and punishing many for the bad deeds of a few.”

Many small agencies and producers, he said, are working on very thin margins, and now, under the agreements, “you can't be incentivized for placing business on the books or for any measure of profitability.”

By issuing a condemnation, the WIAA official said the group “wanted to let carriers know how unacceptable some of the terms of these settlements are” and he hoped there would be “a chilling affect on carriers” and that they “would think twice before throwing producers under the bus.”

Mr. D'Arelli said the Rancho Cordova, Calif.-based WIAA represents about 900 agencies and brokerages and 10,000 individual agents and brokers.

IIABA's Mr. Rusbuldt said his group believes “a strong and competitive insurance environment is crucial for consumers. We also believe that competition is fostered by preserving the right of each insurance company to decide how it should compensate its sales force, including the right to offer and pay incentive compensation within the law.”

IIABA praised the actions of Boston-based Liberty Mutual, which has called the contingency fees appropriate and lawful. Liberty Mutual has resisted settling a suit brought by New York Attorney General Eliot Spitzer that charges the carrier participated in a pervasive bid-rigging scheme with some of its top brokers.

Liberty Mutual said in May that settlement demands being made were “excessive and unreasonable–both in terms of magnitude and demands that would change legitimate business practices in states outside their legal jurisdictions.”

Mr. Rusbuldt said Liberty “is standing up for free market principles.”