Aon Eliminates Contingency Fees

By Mark E. Ruquet

NU Online News Service, Oct. 25, 12:28 p.m.EDT?Aon Corp., under scrutiny in the New York attorneygeneral's investigation that has brought price-fixing chargesagainst one broker, said it will stop accepting controversialincentive payments from insurers.[@@]

Saying it wanted to re-establish trust with its clients, theChicago-based brokerage said it is establishing a new model forcompensation.

Patrick G. Ryan, Aon chairman and chief executive, announcedlate Friday that "because trust and client satisfaction are toppriorities for all of us at Aon, we are discontinuing a practicethat has created enormous controversy and confusion. We cannotpermit even the slightest impression of a conflict betweenacceptance of these commissions and our paramount obligations toour clients."

New York Attorney General Eliot Spitzer has charged in a civilsuit that in the case of Marsh brokerage the incentive payments,known under a variety of fee labels, were payoffs by insurers inexchange for having business steered their way at inflated pricesthrough rigged bids.

"We will work closely with insurance carriers, regulators andother constituencies to establish a new business model that ensuresappropriate linkage of compensation to specific, measurableservices in a way that is transparent, accepted and understood byour clients," Mr. Ryan said.

Aon, Mr. Ryan said, provides "important services on behalf ofunderwriters; however, certain current compensation models mustchange."

Aon said it has begun winding down contingent commissionagreements and expects to complete the process by the end of2004.

The Aon action came a day after London-headquartered WillisGroup holdings said it was ending contingent fee commissions.

A spokesman for Mr. Spitzer's office would not comment on areport that a suit will shortly be directed at AON except to saythat the investigation is continuing.

A call to an Aon representative for comment was not immediatelyreturned.

In an Oct. 14 press release, shortly after the announcement thatMarsh was being sued by Mr. Spitzer's office, Aon said that thepractice of "soliciting ?fictitious quotes,' bid-rigging, andaccepting payments from insurers not to shop quotes" would violatethe firm's policies, and to its knowledge, no employees had engagedin such practices.

Aon added then that on the issue of accepting compensation, "itis a longstanding and well-known practice" within the industry,that is disclosed to clients.

On Friday, Moody's announced it has changed its debt rating forboth Aon and Willis from stable to negative.

More details of Aon's plan will be provided in its earningsrelease this Thursday. A conference call is scheduled for Friday at11 a.m. EDT.

The Webcast can be accessed at www.aon.com.