New Marsh CEO implements reforms

Just one day on the job and new Marsh CEO Michael Cherkasky has led a major overhaul of the brokerage’s business practices. Under the new scheme, the brokerage will not only stop the practice of contingent commissions, as previously announced, but will also make “all revenue streams 100% transparent to clients”. This means clients will receive a fully accounting of fees, retail commission, wholesale commission and premium finance compensation, and will require insurers to show commission rates on policies. The broker says it will also seek “consistent commission rates” so that clients can better compare costs on bids. To this end, the brokerage has set up a global compliance organization reporting to the board and Cherkasky. This organization will provide quarterly “state of compliance” reports to the board’s audit committee.In a conference call yesterday, Cherkasky noted the broker does not yet know how the new scheme will work in terms of replacing lost revenue from contingent commissions. But, he adds, the brokerage sees these steps as giving it a competitive advantage in the market. Cherkasky says the focus now is on the speedy resolution of an internal investigation of issues relating to civil charges brought by New York Attorney General Eliot Spitzer. On Monday, Spitzer said the removal of former Marsh CEO Jeffrey Greenberg and his replacement with Cherkasky “permits Marsh and this office to move forward toward a civil resolution of our lawsuit”. Spitzer says his office will not pursue a criminal case against Marsh, but will look to criminal prosecution of individuals involved in the alleged “bid-rigging” schemes his office says it has uncovered. Cherkasky says there will also be some restitution to clients who may have been disadvantaged by bid-rigging, if it is uncovered. However, he continued to note that the industry has long used contingent commissions as a standard business practice and changes to eliminate this practice are as a result of the stand taken by regulators, not an admission that such practices are unfair or disadvantaged any clients in the past.Cherkasky says the brokerage hopes to complete its internal investigation in 30 days, but will certainly do so by the end of the year.