Remuneration paid to a broker according to the volume or profitability of business placed, creating an interest in steering the client to one insurer rather than another.
A contingent commission is paid by the insurer to the broker not for a particular contract but for the overall performance of the book placed, whether volume achieved, profitability recorded or renewal rate. It is economically defensible, since it rewards a quality of selection that benefits both parties, and it creates a structural conflict of interest, since the broker is the policyholder's agent while being paid by the insurer on criteria the policyholder does not know. The conflict becomes a breach once placement stops being guided by the client's interest, and the line between steering and advising is fine. The scandals of the 2000s led to a remedy through transparency rather than prohibition: an obligation to inform the client of the existence and nature of such payments, and in some regimes to quantify them on request. The debate is not closed, since disclosure a client does not read corrects no conflict, and conduct regulators have since moved their examination from transparency toward the value actually delivered.
The investigation opened in 2004 by the New York Attorney General against the broker Marsh, concerning contingent commissions and rigged bidding, was settled in January 2005 with an agreement to pay 850 million dollars to clients and with the major global brokers abandoning such payments.
contingent commission, commission de résultat courtage, profit sharing courtier, surcommission