contingent commission

Case Study The attorney general of Connecticut announced in December 2006 that insurance giant Chubb Corporation had agreed to pay $17 million and adopt certain business reforms to settle allegations the firm had paid contingent commissions to agents and brokers who steered business to Chubb. In one instance, Chubb solicited agents and brokers to become part owners in an offshore reinsurance company the firm had created. Chubb paid the offshore company (and its owners) a fee to reinsure a portion of claims resulting from policies steered by the agents and brokers to Chubb. In other instances, the firm paid salaries to individuals who claimed to be independent agents, but who actually sold only Chubb policies. An internal investigation by Chubb indicated the firm paid contingent commissions of nearly $850 million between 1999 and 2002. The state claimed these costs resulted in higher premiums for consumers. Insurance companies ACE, AIG, St Paul Travelers Companies, and Zurich American Insurance Company had previously reached settlements that prohibited them from paying contingent commissions in specified lines of insurance.