Cherkasky says the revenue from the fees, some of which were previously not allowed, could bring amounts that “could be material to earnings.”
The new deal modifies a legal settlement negotiated in 2005 with then-New York Attorney General Eliot Spitzer that banned Marsh & McLennan from taking so-called “contingent commissions” from insurance companies, a practice that had been a major source of revenue for the company. According to Cherkasky, under the new agreement, while those contingent commissions are still not allowed, Marsh & McLennan is free to receive earnings for such duties as electronic processing, preparing reports and other services previously not allowed.
As an industry practice, insurance companies award contingent commissions to brokers that bring in business to that insurer. The attorney general attacked the practice, saying it creates a conflict of interest because such commissions essentially mean that the brokers paid by insurers are not really working for the client they represent or achieving the best deal on insurance.