New York Attorney General Eliot Spitzer told a Senate subcommittee today that he has found “favoritism, secrecy and conflicts rule” the insurance brokerage market, “not open competition.”[@@]

Spitzer said the results of his ongoing probe of insurance brokers follow the same pattern he found in investigating the mutual fund industry and the research and investment banking arms of large Wall Street firms.

Brokers, he said, should be “called to account for their steering activities.”

Spitzer testified at a hearing organized by the financial management subcommittee of the Senate Governmental Affairs panel.

“How has the culture of favoritism and payoffs distorted their basic fiduciary duty to serve the customer?” Spitzer asked the subcommittee. “How can we take steps to reform this culture by requiring appropriate disclosure to ensure the markets are operating properly?”

Spitzer said he supports state regulation of insurance.

“Nonetheless, I do believe there is a role for the federal government, especially in the areas of offshore capitalization and investment by insurance companies,” Spitzer said.

At a minimum, Spitzer said, “federal involvement may be necessary to assure some basic standards of accountability on the part of insurance professionals.”