Marsh’s high-risk strategy paid off

Marsh & McLennan, the world’s biggest insurance broker, came under attack in the US from combative American prosecutor Eliot Spitzer for misleading clients. It was accused of arranging ‘fake’ quotes for how much insurance would cost, and getting rebates from the firms with which the business was placed.

The reaction of Bruce Carnegie-Brown, head of Marsh in the UK, was exemplary in PR terms. He admitted that the UK operated Market Service Agreements – the rebate system – which he immediately stopped. Then he appointed Freshfields, the solicitors, to conduct an independent inquiry into Marsh’s UK business practices and committed himself to publishing the results.

Carnegie-Brown’s high-risk strategy paid off when the report was published. It did not give the UK business a completely clean bill of health. It found that MSAs influenced how business was allocated between competing insurance firms but the lawyers said they had not found evidence of the clients being disadvantaged. Equally to the point, there was no evidence of quote-rigging. So on balance the firm came out okay and got an easy ride in the press.

The second smart move was to accept criticism in the report while seeking to position MSAs as a problem for the entire insurance industry. These agreements are a widespread insurance practice. Current standards of governance seem to find them unacceptable, so the industry needs to work together to develop a new way of doing business.

Marsh stopped short of telling its competitors that they should be grateful it had been caught because it has given them all the opportunity to reform together – but that was the implication. The firm certainly deserves some award for coolness under fire.

anthony.hilton@haynet.com

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