Brokers battle over contingency fees at RIMS Canada, Halifax

The broker panel at this years Risk and Insurance Management Society Canada Conference in Halifax, Nova Scotia heated up when asked to comment on what has replaced contingency fees, with some suggesting that they are here to stay, and others arguing that focus needs to shift to delivering value.
The panel, co-chaired by Kim Hunton, RIMS Canda council chair, and Janice Ochenkowski, RIMS president, consisted of: Stephen P. McGill, Aons CEO, Risk Services, Americas; Roger E. Egan, CEO, Integro Ltd.; Philip V. Moyles, executive vice president of Marsh; and Donald Bailey, Willis CEO, North America.
Hunton initially posed the question to Egan, who stressed the importance of transparency as an antidote to the potential of a conflict of interest.
With transparency that form of income will become a subject of negotiation with buyers as to what the overall compensation will be for brokers, and thats healthy, Egan suggested.
While Aons McGill, agreed that transparency is important, he admitted that hes not sure of the direction the industry is taking on the matter.
Referring to A.M. Best research, he noted that last year across commercial and personal lines there was US$4.6 billion [approximately Cdn$4.7 billion] in contingency profits, an increase of $1 billion from 2004, which was pre-Spitzer intervention.
A stable marketplace, combined with transparency and consistent pricing is the key to remaining profitable in a volatile marketplace, McGill said.
But Willis Bailey chimed in, suggesting that Egans comment was offensive.
The focus needs to be on delivering value, he retorted.
Its not a question of whats legal, its a question of whats right, he posited.
Marshs Moyles disagreed with Bailey, arguing that the fees are not going to be replaced, and that theyre here to stay.
Numerous jurisdictions create difficulty, he said, for global firms to determine exactly what they are in a local jurisdiction.
From my personal perspective, determine what are you and who you are and represent that to your clients and prospects. And then you can have a discussion about compensation and where it comes from – whether that be the marketplace or directly from the client, or a combination of thereof.