In November 2004, New York's prominent Attorney General (and now Governor) Eliot Spitzer accused insurance broker Marsh & McLennan of defrauding its clients by accepting "contingent commissions." Contingent commissions are bonuses that insurers pay to brokers and independent agents (collectively "independent intermediaries" or "producers") for bringing the insurer a particularly large volume of profitable customers. Since Spitzer's initial attack on contingent commissions, his office has parlayed similar accusations into six settlement agreements with major insurance industry companies, twenty guilty pleas from these companies' executives and officers, and approximately $3 billion in restitution and penalties. According to the latest count, more than twenty states have opened their own investigations into misconduct in the insurance industry. And seven states, with more expected to follow, have passed legislation to combat the types of practices Spitzer uncovered. Federal officials have monitored these responses closely, with some suggesting that they expose fundamental problems with lodging insurance regulation at the state-rather than federal-level. In short, during the last two years contingent commissions have caused a scandal unparalleled in the history of the property-casualty insurance industry.
"Beyond Disclosure: The Case for Banning Contingent Commissions,"
Yale Law & Policy Review: Vol. 25
, Article 3.
Available at: https://digitalcommons.law.yale.edu/ylpr/vol25/iss2/3