Risk managers grill top brokers over fees.

On the lunch menu at the Risk and Insurance Management Society Inc.'s annual conference on April 19: Caesar salad, a tasty fish and a pair of grilled brokers. Under hard questioning by risk managers, two titans of the brokerage industry disagreed on whether brokers ever should receive contingent compensation.

While Michael G. Cherkasky, president and chief executive officer of Marsh & McLennan Cos., and Patrick G. Ryan, executive chairman of Aon Corp., agreed that disclosure of all fees is necessary so insurance buyers know exactly what they are paying for, they disagreed on whether contingent commissions should be allowed in the industry. They also took some heat on how they failed to identify the biggest risk facing their own companies: the issue of potential conflicts of interest stemming from accepting contingent compensation from carriers.

The two executives answered tough questions offered by Susan R. Meltzer, an assistant vice president at Sun Life Financial, and incoming RIMS president Ellen Vinck, vice president of risk management and benefits for United States Marine Repair Inc.

"I won't speak for others, but I'll speak for Aon. We gave them up because we felt the world had changed and the very appearance of a conflict of interest was unacceptable," Ryan said. "We are selling our wholesale business for the same reason."

Cherkasky offered a mea culpa. "We at Marsh stumbled, and we stumbled badly because we put into play the issue of trust," he said. "We have to make sure that never happens again."

However, the issue still is unresolved.

While the top four brokers stopped taking contingent commissions, smaller regional brokers still are accepting such payments, Meltzer noted. She asked Ryan and Cherkasky whether brokers should be uniform in their approach to contingent compensation.

"Contingency fees are inherently a problem," Cherkasky said. "I firmly believe the marketplace needs to say no to contingencies ... and agree they are no longer acceptable."

"I disagree," Ryan said. "Contingent commission for Aon is gone, should be gone. But I can't speak for another broker or agency and their relationships to their clients. What I do think is essential is that it be fully transparent, everything be fully transparent.

Meltzer asked the executives how their companies use enterprise risk management when "you missed the most significant risk exposure to your firms." Cherkasky admitted, "We did a very, very bad job of understanding the risk ... we put a multibillion-dollar enterprise at risk because we didn't get it right ."