Marsh to Pay $850million to Settle Charges by Spitzer: NYT

[ultraist]

http://www.nytimes.com/2005/01/31/business/31cnd-insu.html?hp&ex=1107234000&en=34284411348488ed&ei=5094&partner=homepage
Marsh to Pay $850 Million to Settle Charges by Spitzer
By TERENCE NEILAN
Published: January 31, 2005

Marsh & McLennan, America's largest insurance brokerage company, agreed today to pay $850 million to settle charges by the New York State attorney general that it took payoffs from insurance companies to send them clients.

Under the agreement, Marsh & McLennan will set up an $850 million fund to provide restitution to nationwide policyholders over four years. It said none of the money represented a fine or a penalty.

Marsh said it neither admitted nor denied allegations in a complaint filed last October by Attorney General Eliot Spitzer of New York.

But in a statement on the attorney general's Web site, Marsh issued a public apology for what it called "unlawful" and "shameful" conduct. con't

[burythehatchet]

1. chump change to Marsh

the key was not admitting any guilt. That means there's little chance of actual defrauded customers getting recourse.

[ultraist]

2. But, how MUCH compensation is the question

snip
"The fund will compensate clients who retained Marsh to obtain insurance between Jan. 1, 2001, and last Dec. 31, the company said in a statement. Companies will not have to prove they were harmed in order to receive payment."

"In addition, Mr. Spitzer said, Marsh will adopt "dramatic new reforms," including an agreement to limit its insurance brokerage compensation to a single fee or commission at the time of placement.

It will also ban so-called contingent commissions and a requirement that all forms of compensation will be disclosed to and approved by Marsh's clients.

"These landmark reforms will help protect against conflicts of interest and help restore the integrity of the entire insurance industry, if followed by other firms," Mr. Spitzer said
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It appears to be one small step towards corporate responsibility and accountablity. But, they got off easy. This was THEFT.

[burythehatchet]

3. the real cost is only going to be borne

when the insurance distribution process is overhauled. Not likely because of the $$$ men in the bidness.

[dannynyc]

5. Not as simple as it looks

I was a consultant at Marsh (in the insurance brokerage unit) for about five years. During that time I spent a great deal of time in many Marsh offices and got to know many people. When I first heard of Spitzer's lawsuit, I was truly shocked. During the time I interacted with Marsh personnel, I never got any hint of anything dishonest happening. If anything, there seemed to be an understanding that Marsh, as a company, wanted its employees to comply with ethical standards.

After the news of the lawsuit broke I spoke to some former co-workers. They were as shocked as I was when they heard about the lawsuit. It seems the some of the issues Spitzer addressed (specifically, having fake bids used in the process of getting bids) occurred in one operating unit, and most employees did not know what was happening.

The other major issue, having insurance companies pay money back to brokers, was considered a normal operating condition within the insurance company. As I read some of the reports, the money paid back to brokers was not hidden from clients - it was stated in insurance contracts.

The actual amount Marsh needs to put aside for reparations may be small. However, they've lost a large chunk of income from insurance companies that will hurt their bottom line. From what I understand, part of this entire situation is an attempt to change the way insurance brokers do business. I'm not going to comment on whether that is good or bad - honestly, I don't know. However, the cost to Marsh is much greater than the $850 million they're paying right now.

I honestly have not come to any conclusions about this entire situation. I do know a large number of employees - some of which I have been with the company for many, many years, are gone because of required cutbacks. Even though I've not been employed at Marsh for a number of years, I do feel bad for the people who have been affected. They did think they were working for a company where ethical standards were important.

As much as I have not figured out for myself the good, bad and in between about what has happened with Marsh, I do know it's not a simple situation.

[MsUSA]

4. Elliott Spitzer is on Minnesota Public Radio now....

Because of the no fine or penalty phrase included, the State of NY will NOT be receiving any payments, all the money will be going to all the consumers. Mr. Spitzer purposely did it this way so the State of NY wouldn't get any money and the money would go to the people hurt the most, consumers. I love this guy.