California Attorney General Bill Lockyer’s office continues a “preliminary” look at insurance brokerage practices, while state insurance regulators announced a plan to address any problems they uncover.[@@]
In addition to California, New York Attorney General Eliot Spitzer and Connecticut Attorney General Richard Blumenthal are conducting their own inquiries into the matter.
In the California attorney general’s office, an internal team of lawyers is looking at charges involving broker payments from insurance companies and bid rigging, says Tom Dresslar, a spokesman for Lockyer’s office. The team includes lawyers in antitrust, securities fraud and the special crimes unit as well as the section representative for the state insurance commissioner.
The attorney general is working with California Insurance Commissioner John Garamendi, he adds.
“It is premature to say that there is a formal investigation at this point. It is at a preliminary stage. We want to see what role, if any, we will play,” says Dresslar.
A decision should be made fairly soon, he adds. “We do not want to tarry too long.”
Diane Koken, president of the National Association of Insurance Commissioners, Kansas City, Mo., detailed plans worked out by commissioners to address any brokerage problems that its planned investigation bring to light.
Koken also defends the work of state insurance regulators against critics who have said federal regulation of insurance is needed.
“Federal oversight would not have caught [alleged abuses] faster than the states,” Koken says.
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.