CIAB Says Congress Watching Brokerage Mess

By Matt Brady , Washington Bureau

NU Online News Service, Feb. 2, 4:09 p.m. EST, Washington?The actions of state lawmakers in the wake of the Marsh insurance brokerage bid rigging scandal could become a factor in the Congressional debate over a federal role in insurance regulation, a broker trade group advised yesterday. [@@]

Officials with the Council of Insurance Agents and Brokers, at a briefing, said key staffers of committees in both the House and Senate are watching closely to see what the states do.

Joel Wood, senior vice president of government Affairs for the Council, said, states are "really looking at this as a critical challenge to state regulation."

He said the concern for the industry is that the states could end up, "all over the map" in terms of the level of broker and agent fee disclosure they require, creating difficulties for those operating in several jurisdictions.

Fees have been under scrutiny since October when New York Attorney General Eliot Spitzer charged in a civil suit that Marsh brokerage had steered commercial insurance customers to insurers who paid fees that were essentially kickbacks. Insurers in the scheme it was alleged had helped fix prices by rigging bids. Marsh parent Marsh McLennan Companies settled the case yesterday by apologizing and agreeing to repay $850 million to customers.

The fee issue could be dealt with by Congress in legislation to set insurance regulatory standards being crafted by Reps. Mike Oxley, R-Ohio, the House Financial Services Committee Chairman, and Richard Baker, R-La., who chairs a key subcommittee, Mr. Wood noted.

Rep. Baker has held numerous hearing on the issue of using federal tools to streamline state insurance regulation, Mr. wood said, and "this does fit in exactly with the kind of examination of what states do," that Reps. Oxley and Baker have undertaken.

Meanwhile, Council President Ken Crerar responded to Mr. Spitzer's comments Monday at the National Press Club Monday. Mr. Spitzer said the insurance industry had acted as a cartel, and that "many more" guilty pleas were to come in the wake of the Marsh settlement.

"The insurance industry has corruption that is rife throughout it, rife," Mr. Spitzer said. "It touches every line of insurance that is purchased, every line."

In response, Mr. Crerar said that Mr. Spitzer's characterization "is just not the industry we know." However, he acknowledged that the headlines stemming from the Marsh case have affected the industry overall. "The actions of a few have brought a cloud over the whole industry," he said.

The Marsh settlement "closes a troubling chapter in the industry's recent history," Mr. Crerar said. "Now it's time to focus back on the client and the trust relationship."

Trust is "critical" for brokers, Mr. Crerar noted, adding that it is "the bottom line basis on which that relationship is built."

Mr. Crerar said that increased disclosure would help the industry to regain the public's trust. "Clients have the right to know," about the various relationships a broker might have with insurance companies, he said, adding that the Council has supported increased disclosure requirements for several years.