New York insurance officials and the attorney general’s office have agreed to let mega-broker Marsh accept some fees from insurance companies for work on processing and servicing of accounts. Marsh chief executive Michael Cherkasky said in an interview that the revenue from the agreement “could be material to earnings.”

The approval comes in an amendment is to a 2005 settlement with then-Attorney General Eliot Spitzer and the insurance department.  The original settlement agreement imposed prohibition on all contingency earnings and restricted other fees and commissions that Marsh could accept. Observers say the fees could help Marsh regain revenue lost as a result of giving up market service agreements and contingent commissions, which were prohibited by the original 2005 agreement with then New York AG Eliot Spitzer.

This now second amendment to the original settlement allows Marsh & McLennan to take revenue for electronic processing, preparing reports and other services that were previously not allowed, Cherkasky said. The amendment was posted to the New York Insurance Department web site on August 7, 2007.

In April 2005, the settlement was amended to limit the scope of business reforms that Marsh agreed to, to exempt overseas operations. Then in August 2006, the settlement was amended again so that Marsh could accept contingent commissions for its managing general agency business, under an agreement reached with New York’s attorney general and superintendent of insurance.

What It Means to Agents:  The question PIA has can be stated in one word: “why?” WHY are PIA agencies subjected to the prohibition of their contingency earnings when they had nothing to do with, or any connection to, alleged misdeeds?

Yet, mega-insurance brokers that sit at the very heart of these settlement actions triggered by misdeeds of at least some of their employees in 2004 are getting their prohibitions loosened so that they gain income? 

WHY are PIA members being punished at all?  Is this what the NAIC and some state DOIs consider as fair? Are other states’ AGs & DOIs just going to roll over and permit such legal inequity to be practiced in their states?  We know Georgia isn’t, and PIA’s Ken Auerbach & Fred Thomas (MT NBD) are visiting with Montana officials this month.  How about your state?  Contact patbo@pianet.org

Marsh Agreement, Subsequent Amendments (NY State Ins. Dept. website)

Marsh Cleared to Accept Insurer Fees (Insurance Journal 8/8/07)

Marsh Reaches Fee Pact With New York – CEO (Reuters 8/7/07)

August 15, 2007