California, NAIC Broker Investigations Continue

She points out that the New York insurance department has been working with Attorney General Spitzer’s office. In fact, both the New York and California insurance departments had received a letter in February from an undisclosed party expressing concern about alleged misdeeds. They had each started an investigation but had not gathered enough evidence to proceed, Koken adds.

Federal lawmakers have not been in contact with her about the issue or its impact on the debate on federal regulation of insurance, she says.

Meanwhile, the National Association of Insurance Commissioners has selected a group of 13 state insurance commissioners to investigate the issue, she says. That group consists of the commissioners of Illinois, California, New York, Texas, New Jersey, Georgia, Connecticut, South Carolina, Pennsylvania, Oregon, Maine, Montana and Missouri.

Prong 1 of a 3-point approach the group plans is the “expeditious development of a model regulation for broker disclosure,” says Koken. “Had there been greater transparency, there might not have been the structure to do alleged bid-rigging.”

Whether or not broker will be defined to include an agent still needs to be discussed, she says. In Oregon, the term broker as used in a proposed regulation that could take effect next month would include agents.

Prong 2 will involve fact gathering, says Koken. “We recognize that we still don’t know the facts: whether it is one line, all lines, certain companies, certain regions, certain states.”

Based on its findings, the group will then undertake targeted examinations, she adds.

The fact gathering will be similar to the approach used for such issues as the race-based premium question, she says. The race-based premium issue concerned unequal premiums charged to individuals on the basis of race.

Prong 3 is a Jan.1, 2005 launch of an NAIC online fraud reporting site that tipsters could use anonymously, Koken explains.