Spitzer, insurers go head-to-head in front of NY Assembly

New York Attorney General Eliot Spitzer and insurer representatives each had their chance to speak on the issue of broker compensation at hearings before the New York Assembly on Friday.
In his address, Spitzer outlined his investigation into allegations of bid-rigging and what he perceived as a conflict of interest inherent in contingent commissions he noted that suits have already been filed by his office against Marsh & McLennan and Universal Life Resources. But Spitzer went on to say that he would continue to look into other areas of insurance, including finite insurance products. He did credit the industry with having already made internal reforms to address broker compensation concerns, but adds that he will be looking into “conflicts of interest that arise between brokers and captive insurance and reinsurance companies that are operated or owned by brokers”.
Spitzer also urged the legislature and federal authorities to look at setting minimum standards of accountability for the insurance industry.
The Property Casualty Insurers Association of America (PCI) argued with Spitzer’s claims that contingent commissions represent a conflict of interest. Kristina Baldwin, New York regional manager for PCI testified at the hearings and says, “PCI believes that transparency and disclosure are important components of open, fair, competitive, and reasonably regulated markets. However, we oppose overreaching or burdensome proposals that fail to deliver any real value to the insurance consumer, such as imposing blanket prohibitions on incentive compensation programs. The terms and conditions of such agreements are best left to the private parties engaged in the contracts.”
She says the issue of contingent commissions must be seen separately from allegations of bid-rigging which, if proven, should be answered with prosecution for those individuals and corporations involved.
In related news, a senior executive of Marsh Inc. pleaded guilty Thursday to charges of bid-rigging. This means six executives at four companies have now pleaded guilty to charges stemming from Spitzer’s investigation, and all are expected to testify in future cases, the Office of the Attorney General says.