Willis North America Inc. agreed to pay $51 million and end the use of contingent commissions as part of a deal to end investigations by the attorneys general of New York and Minnesota.
Willis stressed that it is the only insurance broker to resolve these matters without the New York Attorney General’s filing a lawsuit and without being required to issue an apology. “We also are pleased that the investigation found no evidence of the practice of bid-rigging or tying,” added Joe Plumeri, chairman and chief executive officer of the company’s London-based parent, Willis Group Holdings.
“Willis moved quickly to remedy its problems,” said New York State Attorney General Eliot Spitzer, in a statement. “Its actions will help bring about greater transparency and accountability in the insurance industry. Willis chairman Joseph Plumeri has demonstrated admirable leadership in spearheading Willis’s response to the issues raised in our investigation and in implementing reforms at the company.”
Under the agreements, the nation’s third-largest insurance broker will create a $50 million fund to compensate U.S. clients who retained Willis to place insurance between January 1, 2001, and December 31, 2004, which resulted in contingent commissions. Willis also will make $1 million in payments to its Minnesota clients.
The company stressed that none of the $51 million represents a fine or a penalty and that it admitted no wrongdoing or liability. That entire amount may be tax-deductible; at the time of the of the $850 million Marsh and McLennan Cos. settlement earlier this year, The Wall Street Journal noted that although penalties and fines are generally not tax deductible, restitution or disgorgement of profits have been deductible expenses in prior settlements with state and federal regulators.
In addition to a ban on contingent commissions, Willis agreed to implement a number of other practices, including fully disclosing all compensation that Willis receives for its services, which the company has been doing since January 2005; providing enhanced training for its associates on their duty of care to clients, and prohibiting associates from accepting compensation, gifts, entertainment, or trips from insurers.
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