Ace Ltd. chief executive officer Evan Greenberg clashed with brokers’ bosses in a fierce debate over commissions during a showpiece lunchtime event at RIMS yesterday.

One of seven leading figures from the insurance industry taking part in the CEO Leadership Panel, Mr. Greenberg described brokers’ arguments in favour of supplemental commissions as “cynical”.

Mr. Greenberg, who runs the Island’s biggest insurance and reinsurance company, drew applause from a conference hall packed with an industry audience of more than 2,000 diners.

He took issue with comments made by fellow panellists before he spoke, the bosses of two global insurance brokers, Marsh Inc.’s Brian Storms and Arthur J. Gallagher & Co.’s Pat Gallagher.

Supplemental commissions are extra payments made to brokers by insurers, rewarding them for the business they bring.

They have been designed to replace contingent commissions, which came under the spotlight in recent years during probes into the insurance industry by former New York Attorney General Eliot Spitzer.

Mr. Spitzer claimed they created a conflict of interests that could sway a broker to direct business to a certain insurer, rather than look for the best deal for the customer.

Ace and American International Group (AIG) were two of the insurers who made settlement agreements with Mr. Spitzer’s office last year, which prevent them from paying “contingent commissions” to agents and brokers who sell automobile, homeowners and certain other insurance products. The agreement resolved charges of bid rigging and other improprieties related to contingent commissions.

“I think there is a conflict of interest and even if they (supplemental commissions) create more transparency, transparency does not eliminate conflict,” Mr. Greenberg said.

“And frankly, who does the broker work for? The broker works for the client. We look at it very simply. An agent works for the company, so I have no problem with contingent forms of payment for an agent.

“But if it’s a broker — I don’t think there should be any contingent forms of payment unless it is between the broker and the client and the client is paying. Otherwise you’re establishing a conflict. And frankly, it’s a little cynical to me, given what the industry has just gone through over the last few years.”

AIG CEO Martin Sullivan backed up Mr. Greenberg. He said: “The broker should be remunerated in one of two ways — either a fee from his client or a commission, it’s as simple as that. We have no intention of paying supplemental commissions.”

Earlier Mr. Storms had argued that supplemental commissions would help brokers meet extra expenses incurred by improving their level of service and efficiency.

“We have a panel of people we are working with, including RIMS officials, on this issue, because it’s a much broader issue than supplemental commissions,” Mr. Storms said. “We and many others are making significant investments in our industry to upgrade technology and systems, but there’s a cost to doing that.

“That cost has to be shared. It’s not a matter of how we brokers are going to be paid on a supplemental basis — it’s how these costs are going to be shared. Marsh wants to know how our clients and the industry feel about this and we certainly understand transparency better than anyone.”

Fellow broker Mr. Gallagher said there had been a huge move towards transparency in the last 18 to 24 months.

“We turn to our clients and we say, ‘If the value is there, how do you want to pay me?’ That process, in my opinion, eliminates conflict.”

John Amore, CEO General Insurance of Zurich, saw the need for some form of extra remuneration for brokers.

“When you have 13,000 brokers and agents in the US, you need more flexibility than just one system,” Mr. Amore said. “We don’t plan to do supplemental, but we do need more than one type of compensation.”

Earlier this week, Joseph Plumeri, the CEO of global insurance broker Willis Group, came out firmly against supplemental commissions.

In Willis’ opinion, the new supplemental incentive pay plans are unacceptable — even if government watchdogs approve them — because they raise the same conflicts that were associated with contingent commissions.

Mr. Plumeri was originally scheduled to sit on yesterday’s panel, but had to pull out.

Mr. Greenberg enjoyed total consensus with the panel when he described the US system of insurance regulation, which involves 50 sets of rules, one for each state, as “nuts”.

The US is one country and should have one set of regulations he argued.

And he also spoke about his support for diversity in the industry, giving equal opportunity to all.

“My company is a meritocracy,” Mr. Greenberg said. “The best person gets the job. We are blind to race, colour and gender.

“We do focus in our company to ensure that people from all kinds of backgrounds feel comfortable working in the organisation. At the end of the day you want the best and brightest and you want them to thrive.”