PCI's Csiszar, Transparency May Have Barred Scandal

By Daniel Hays

NU Online News Service, Oct. 20, 11:11 p.m.EDT?More transparency in insurance industry activitiesmight have prevented the industry's expanding bid rigging scandal,Ernie Csiszar, president of the Property Casualty InsurersAssociation of America told National Underwriter.

Mr. Csiszar made his comments by e-mail in response to aquestion about a recent talk in which he told members of the StateInsurance Trade Associations at a meeting in New York that thecurrent system of insurance regulation is too intrusive

"My reference to the intrusiveness of the state system was madein regard to its reliance on rules and processes, rather thanprinciples and outcomes. This is particularly true when it comes toprice controls and the pre-approval of pricing by regulators," Mr.Csiszar wrote.

He took note of a civil suit brought by New York AttorneyGeneral Eliot Spitzer, which charges that Marsh brokerage wasguilty of rigging bids and price fixing with major insurers. Thesuit alleges Marsh had its customers buy insurance at inflatedprices from insurers who kicked back to the brokerage.

"It is impossible to regulate every activity and all theregulation in the world could not have prevented the fraudulentacts that are detailed in the Spitzer [lawsuit] complaint.

"A more transparent and competitive regulatory system ?including provisions on disclosure of broker compensationarrangements ? may have helped prevent such activities or broughtthem to light much earlier. Transparency is the price that theindustry must pay to remove price controls and achieve a morecompetitive market.

Mr. Csiszar said the Spitzer complaint "is not an indictment ofthe state regulatory system's failure. In most states, only theattorney general has jurisdiction over restraint of trade issuessuch as those alleged in the Spitzer complaint."

According to Mr. Csiszar, the New York Attorney General'sinvestigation was "greatly assisted" by the cooperation andcoordination of the New York Insurance Department andSuperintendent Gregory V. Serio, "who was credited by Mr. Spitzerfor his agency's role in the effort."

Mr. Csiszar, formerly the South Carolina insurance director,told the trade associations' meeting that despite flaws in thestate?based insurance regulatory system that federal regulation isnot the solution.

"Just look at the Department of Homeland Security, our mostrecent federal bureaucracy. It already has more than 38,000employees. If you think that most states can produce a lot ofpaper, wait until you see what the folks in Washington, D.C. cando," he said.