So here we have Mercer and Marsh UK’s parent company in the US being ‘fined’ for allegedly taking backhanders from insurers without any disclosure to their clients. A bit of a conflict of interests one could say.
Of course, to avoid a lengthy legal battle and potentially even more bad publicity they settle without admitting anything. But action speaks louder than words – would you pay $850m just to get rid of an irritation, unless you had been caught bang to rights perhaps? I think there is more to this than first meets the eye.
Let’s take a look at the three favoured investment platforms that Mercer currently recommend in the UK. They seem to like Friends Life, Zurich (the old Allied Dunbar) and Aegon (formerly Scottish Equitable).
Is it just a coincidence that these 3 platform providers used to be very popular with IFAs due to the higher levels of commission payable? Could it be that Mercer favour these 3 platforms for reasons other than what’s best for the client? Could that American culture have possibly permeated into the UK subsidiaries? Surely not!
One could ask is there some sneaky benefit being derived that clients are not aware of? Why is it that Fidelity and BlackRock don’t get a look in? Surely they are highly regarded and super efficient, especially when you compare their back offices with the likes of Aegon. I think they still use a 1980s mainframe by the look of their printed output.
The extract below is from this site:
Insurance Broker Marsh & McLennan Fined $850 Million for Rigging Prices
By Joseph B. Treaster
The New York Times — NEW YORK
Marsh & McLennan Cos., the largest insurance broker in the world, agreed Monday to pay $850 million to settle a lawsuit accusing it of cheating customers by rigging prices and steering business to insurers in exchange for incentive payments.
Although the company did not formally acknowledge any wrongdoing, Michael G. Cherkasky, the chief executive of Marsh, apologized for what he called the “shameful” and “unlawful” behavior of “a few people” at the company. But he said, “We don’t believe that our corporate entity has ever been involved in a pattern of covering up or a pattern of criminal behavior.”
The $850 million, which Marsh will pay over a four-year period, will be used to compensate about 100,000 corporations and smaller businesses whose commercial insurance was arranged by Marsh from 2001 and 2004.
In the days after the charges were filed in October, Marsh stopped taking incentive payments from insurers and its chief executive, Jeffrey W. Greenberg, was forced to resign. The company agreed Monday to fundamental changes in the way it does business.
The lawsuit, brought by Eliot Spitzer, the New York attorney general, maintained that Marsh received kickbacks from insurance companies that increased the cost of coverage for its customers and did not serve as an unbiased broker. He has also been investigating other brokers and insurance companies around the country for similar activities, and attorneys general and insurance regulators in many states have joined in with their own inquiries.