Marsh to axe jobs in wake of Spitzer suit

Marsh & McLennan is planning swingeing job cuts across its worldwide business as it faces a multimillion-dollar settlement with New York's attorney general, Eliot Spitzer, who has accused the world's largest insurance broker of rigging bids to collect inappropriate fees from customers.

Marsh & McLennan is planning swingeing job cuts across its worldwide business as it faces a multimillion-dollar settlement with New York's attorney general, Eliot Spitzer, who has accused the world's largest insurance broker of rigging bids to collect inappropriate fees from customers.

Marsh may announce the job cuts today, as it unveils third-quarter results. The redundancies are expected to run into thousands. Marsh's business in London and other parts of Europe are likely to be affected as well as its headquarters in New York. Marsh has 42,000 employees across the world.

Marsh, which held a crisis meeting of senior employees in New York yesterday, is still in discussions with Mr Spitzer's office about how much it will have to hand over to settle a lawsuit the combative government lawyer launched on 14 October.

Mr Spitzer has said Marsh pursued two business practices which hurt its clients and broke New York's anti-trust law. One was to take "contingent commission" fees from insurers, based on how much business was directed their way and how profitable it was likely to be. Critics say this practice, especially when not fully disclosed, hurts customers because they do not know that their broker is being incentivised by an insurer to give business to them.

The other practice, which is illegal, was allegedly to put forward a set of bogus and overly inflated bids to customers so that they would opt for a bid from an insurer Marsh had already decided to award the business to.

While continent commissions have been widely used in the insurance broking world, allegations about bid rigging have shocked both competitors and employees in Marsh in Europe who have said they had absolutely no knowledge of such practices going on in the US arm of the business.