Investigation Flood Gates Open

By Mark E. Ruquet

NU Online News Service, Nov. 3, 4:26 p.m. EST?New Jersey has joined the growing number of states where regulators and attorneys general are conducting investigations of contingency fee arrangements between insurance carriers and brokers.[@@]

The New Jersey Department of Banking and Insurance Commissioner Holly C. Bakke said her department is conducting an investigation into fee arrangements in response to New York Attorney General Eliot Spitzer's bid-rigging suit against Marsh & McLennan Companies.

" New Jersey is moving quickly to get to the bottom of this issue to assure that consumers are protected in the insurance marketplace," she said in a statement.

The department's investigative task force will work closely with the state attorney general's office and will require a group of brokers to turn over all information regarding compensation and fee arrangements, Ms. Bakke said.

Vinnie Funelas, a department spokesman, said the department has requested information from the state's top 30 brokers, including Marsh, Aon, Willis, and Hilb, Rogal & Hobbs. The department's investigation is being done apart from the National Association of Insurance Commissioner's task force investigation of the broker fees, which New Jersey is a part of.

The department did not request information from Olympic Insurance Agency of West Orange, of which State Sen. Richard Codey is president, because it is not in the top 30 list. Mr. Codey will become governor of the state on Nov. 16 when Gov. James E. McGreevey steps down as he announced he would because of his involvement in an extra-marital affair with another man.

The number of investigations and subpoenas issued are growing as more states begin to ramp up their inquiries following Mr. Spitzer's suit against New York-based MMC.

The attorney general has alleged that executives at MMC's brokerage firm, Marsh, engaged in price-fixing, bid-rigging and manipulation of the placement of insurance contracts in return for profitable contingency fees from certain carriers.

Of the 10 states with the highest direct written premium as compiled by Highline Data, New York, California, New Jersey and Ohio are conducting active investigations where both the insurance departments and the attorney general offices are involved.

In Texas, the department issued a statement on its Web site stating it is looking into the matter and would have no other comment.

In Pennsylvania, where Insurance Commissioner Diane Koken also serves as the president of the National Association of Insurance Commissioners, a department spokeswoman, Melissa Fox, said the department has no criminal authority and is waiting for the task force to complete its work before conducting its inquiry. She said the state's attorney general has opened an investigation.

A spokeswoman in Florida said the department has begun inquiries.

The remaining two states in the top ten, Illinois and Michigan, have issued no statements on an inquiry or investigation. A spokeswoman for the Illinois department was researching the question. Michigan did not return a request for comment.

The NAIC's 13-state task force, which is drawing up the ground rules for uniform inquiry, is scheduled to have an inquiry template for all insurance commissioners to utilize by the middle of November, Ms. Fox said.

Of the 13 states on the task force, seven are on the top-ten premium list. Of the remaining six, Georgia said it is conducting a market conduct study of Marsh. A spokeswoman with South Carolina's department said the department has met with the state's attorney general and is reviewing action, as did a spokesman with Missouri's department. Montana's department is in conversations with its attorney general, a deputy commissioner said, and is meeting with producers on the issue.

Oregon's Department of Consumer & Business Services Insurance Division spokesman Steve Corson said the department has consulted with its attorney general and issued a press release asking for any information from individuals who feel they may have been the victim of bid-rigging or other similar practices. He said the department and the attorney general are still in the initial phase of their action.

Maine's Superintendent of Insurance Alessandro A. Iuppa said his department is waiting for the uniform template of questions before beginning its inquiry. He said he was not aware of any actions contemplated by the attorney general there.

National Underwriter has identified 17 companies that have received subpoenas from the attorney general in either New York or Connecticut or indicated contact with the offices.

They are:

? ACE Ltd.

? Aetna

? Allstate (Connecticut only)

? American International Group

? Anthem, Inc.

? Chubb

? Cigna

? CNA

? ING

? Liberty Mutual

? MetLife

? Minnesota Life

? Progressive (Connecticut only)

? St. Paul Travelers

? The Hartford

? UnumProvident

? XL Insurance

In both the cases of Minnesota Life and CNA, the companies pointed out that the requests were for information only and not an indication of any wrongdoing. CNA's Chairman and Chief Executive Officer Stephen W. Lilienthal pointed out that in New York's suit, it was noted that an executive was asked to provide false quotes and refused. The company's paper was later used in a false quote without its knowledge; he noted, "We were not pleased to learn about this."

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