Hiscox calls for FSA inquiry into insurance commissions

Hiscox, the Lloyd's of London insurer, yesterday called on the Financial Services Authority to follow the lead of Eliot Spitzer, the New York attorney general, and launch its own London-based investigation into insurance market commissions, as soon as it takes responsibility for the sector in January.

Hiscox, the Lloyd's of London insurer, yesterday called on the Financial Services Authority to follow the lead of Eliot Spitzer, the New York attorney general, and launch its own London-based investigation into insurance market commissions, as soon as it takes responsibility for the sector in January.

The FSA has so far declined to wade into the debate over contingent commissions, which was ignited when Mr Spitzer announced he was to sue Marsh & McLennan, the world's largest insurance broker, last month. However, Stuart Bridges, the finance director of Hiscox, said the FSA now has an opportunity to ensure the industry is fully transparent over commissions, as it takes responsibility for its regulation.

He said:"I think the FSA has an opportunity to create some reforms in the market, and I think it should give some consideration to how it would like the market to work in future - in particular, whether it would like better transparency.

"I would hope the end consumer would want to see exactly what commissions they're paying, as they do in the life insurance market where there is complete transparency."

Mr Bridges added that Hiscox had launched its own investigation into the payment of contingent commissions. "We started [our own internal inquiry] within 48 hours of Spitzer's announcement," he said. "Our aim is to ensure we have a clean bill of health."

Meanwhile, Zurich Financial, the Swiss insurer, yesterday became the first European company to suspend a number employees in relation to the wide-ranging allegations of bid rigging and inappropriate fees brought by Mr Spitzer.

Zurich, which has received a subpoena from Mr Spitzer's office to submit documents, said it had suspended several employees in its Excess Casualty underwriting business in the US.

The move came as Mr Spitzer prepared to widen his lawsuit, launched on 14 October. Mr Spitzer told a Reuters conference in New York that his office was on the brink of suing another insurance broker, Universal Life Resources of California.

The news drove shares down in a number of other brokers, including Aon and Willis, both of which have said they would abandon the practice of receiving "contingent commissions" from insurers in return for placing business with insurers.

Mr Spitzer alleges the payments are not in customers' interest, because they could motivate brokers to direct business to the insurers which will pay them the largest commissions, rather than to the underwriters offering the best deals to the end client.

Separately, Connecticut's attorney general, Richard Blumenthal, issued subpoenas against 42 insurers and brokers operating in the state over similar allegations to those highlighted by Mr Spitzer.