The hearing held last Tuesday by a Senate panel pulled out all the stops and produced all the stars of the current and growing investigations into insurance brokerage and agent compensation practices.
The hearing was titled “Insurance Brokerage Practices, Including Potential Conflicts of Interest and the Adequacy of the Current Regulatory Framework” and was held by a subcommittee of the Senate Governmental Affairs Committee.
The original spur for the hearing began in the commercial property-casualty business with the hullabaloo surrounding New York Attorney General Eliot Spitzers investigation of big broker Marsh Inc.s practices, which included contingent commissions and alleged bid-rigging. And many of the officials called to testify at this hearing did indeed speak about that side of the business.
But make no mistake, the probes are spreading to the life and health side of the businessand fast.
As Connecticut Attorney General Richard Blumenthal said of his investigation, it has “expanded significantly in size and scopeand continues to broaden and escalate.” Blumenthal has subpoenaed upwards of 35 insurers so far.
And even though it is still early in the probe, Blumenthal said, “We have seen evidence of illegal and improper anti-consumer conduct, ranging from bid-rigging to fraudulent, concealed commissions and secret payoffs to flagrant conflicts of interestall stifling competition and inflating insurance costs to consumers.”
As you will see in a story on page 8, California Insurance Commissioner John Garamendi has filed a lawsuit against 4 major life and health insurance companies and a San Diego-based brokerage over incentives to the brokerage for steering primarily employee benefits-type business to the insurers.
The National Association of Insurance Commissioners in the person of New York Insurance Superintendent also testified at the hearing. Anyone who is used to the familiar NAIC that moves with all deliberate speed really needs to take a look at the new were-on-top-of-the-situation NAIC.
It is amazing how the application of some federal fire has got the NAICs engine purring almost like a Mercedes, quite a change after years of clunking along in fits and spurts.
Serio spoke about the NAICs proposed amendment to its Producer Licensing Model Act which would not allow “any insurance producer,” whether broker or agent, to receive any payments from a carrier unless it is disclosed in advance to the insured and the insured has agreedin writingto the payment.