Mr. Spitzer's office mailed the companies formal notice that since this 65 percent “tipping point” had been reached for the four lines cited, beginning Jan. 1, 2007, the carriers must stop paying contingencies for these products. They have already given them up for excess casualty insurance.

Connecticut Attorney General Richard Blumenthal and Illinois Attorney General Lisa Madigan also joined in the notices to the four insurers.

Wes Bissett, senior vice president for government affairs at the Independent Insurance Agents and Brokers of America, said the ban is “policymaking by settlement–legislating through the backdoor. There's not a single legislature that has banned contingent commissions or even seriously discussed the idea. This is an effective violation of due process rights of agents.”

Michael D'Arelli, vice president of legislative and regulatory affairs for the Western Insurance Agents Association in Rancho Cordova, Calif., called the settlements “a shakedown–an abuse of power by attorney generals.” He said he has heard from some agent members that they will stop doing business for carriers that drop the commissions.

Hitting the 65 percent level was not unexpected, he said, since many large carriers with captive agents were not paying contingent commissions.