Defending contingent commissions was James S. Gault, president and chief executive officer, brokerage services division of Arthur J. Gallagher, and opposing was Donald Bailey, chief executive officer of Willis North America.

Mr. Bailey began the discussion by saying that "it is odd that we have created the exact same environment where we were five years ago," when the major brokers agreed to stop taking contingent commissions.

Under agreements with attorneys general in several states in the midst of a kickback scandal in 2005, the four major brokers--Aon, Arthur J. Gallagher, Marsh and Willis--gave up taking contingent commissions.

Earlier this year those agreements were reversed, allowing them to accept the arrangements. However, not all brokers are taking the commissions, as some have refused them on portions of their business.

Willis has launched a public campaign against contingent commissions on the grounds that they carry an inherent conflict.

Mr. Bailey suggested that part of the reason why the fees were never banned throughout the industry is because of apathy on the part of risk managers, noting that he expected the subject would fill the room to capacity, which was far from the case as the room was less than half full.

Part of the problem, he said, has to do with education, which is why Willis on Monday announced a Web site with materials aimed at educating risk managers on the subject (http://tinyurl.com/37qu7e9).

Willis has steadfastly refused to accept any contingents on broker business.

Mr. Gault said the issue comes down to client choice, and his firm totally discloses all compensation arrangements to its clients. If the client is uncomfortable with the arrangement, AJG will tell the carrier that contingents are to be excluded on that book of business.

"Transparency should be the norm, and customers should know how carriers compensate us," said Mr. Gault.

Mr. Bailey said one advantage for clients is that without contingent commissions, premiums are lower because the built-in cost of those commissions is taken out.

"We have won business on our position on contingents," he noted.

Mr. Gault argued that by accepting contingents, the playing field has been leveled among all brokers. For AJG, the company was at a disadvantage when it came to acquisition activity because for a time any agency that joined the firm would have had to give up the compensation as part of the transaction. That disadvantage no longer exists.

The important thing is disclosing all compensation to the client and showing what benefits the client gets from the insurance arrangement and why, said Mr. Gault, adding. "It is about delivering service and doing what is best for our clients."

Responding to questions about contingents, Mr. Gault pointed out that at his firm brokers have no idea what the arrangements are, that they receive no financial benefit from them, or know how they would benefit the firm. He also said that having a large book of business with an individual carrier can allow the broker to influence a carrier's decisions to an AJG client's advantage.

William J. Kelly, president of WJK Advisory, LLC, and former president of RIMS, discussed what risk managers should do to control the compensation arrangements.

He noted that the most important thing is to lay out the terms of the arrangement in a well-crafted request for proposal (RFP). He added that buyers should give the broker plenty of time to reply to the proposal with a thoughtful reply.

Mr. Kelly pointed to literature RIMS has available to members laying out the different compensation arrangements and what risk managers should do to control that part of the conversation.