Illinois insurance brokerage giant Arthur J. Gallagher & Co. will pay $27 million to settle charges that it accepted millions of dollars from insurance companies in exchange for steering clients toward those favored companies.

The settlement requires Gallagher to pay back $27 million to clients, including Illinois businesses and policyholders, who were subjected to Gallaghers steering policy.

The steering policy urged Gallaghers brokers to direct their clients to pre-selected insurance carriers in order to achieve targeted levels of business with those carriers. The pre-selected carriers would in turn reward Gallagher with lucrative bonuses, called contingent commissions, for delivering the high-volume insurance business to them.

Gallagher never notified its clients that its policy of placing business with favored carriers to obtain millions of dollars in contingent commission profits potentially conflicted with its professed goal of recommending to each client the insurance policy that was in the clients best interests.

The settlement prohibits Gallagher from engaging in any further contingent commission arrangements. It further makes critical reforms to other business practices. Under the agreement, the Illinois Division of Insurance will verify Gallaghers compliance with these new business practice reforms.

Our comprehensive investigation revealed Gallagher sought and obtained huge payments from insurers in return for steering them enough business to meet secret threshold targets, Illinois Attorney General Lisa Madigan said.

Gallagher never should have accepted these payments without fully and clearly disclosing that these targets and payments created a potential conflict of interest between Gallagher and its clients. This settlement will guard against future conflicts of interest and help to return integrity to this industry.

This settlement sets forth Madigans findings that Gallagher, the worlds fourth-largest provider of insurance brokerage services, operated under an undisclosed and unwaived potential conflict of interest by seeking to maximize contingent commission dollars by directing business to pre-selected insurers.

Madigan praised Gallaghers full cooperation in the investigation and settlement process.

To its credit, Gallagher recognized the need to quickly cooperate and provide my office with all the information we requested in our investigation. Its Chief Executive Officer, Patrick Gallagher, personally participated in settlement discussions, which facilitated a prompt and fair resolution to this situation.