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 stateswhere regulators and attorneys general are conductinginvestigations of contingency fee arrangements between insurancecarriers and brokers.[@@]

The New Jersey Department of Banking and Insurance CommissionerHolly C. Bakke said her department is conducting an investigationinto fee arrangements in response to New York Attorney GeneralEliot Spitzer's bid-rigging suit against Marsh & McLennanCompanies.

" New Jersey is moving quickly to get to the bottom of thisissue to assure that consumers are protected in the insurancemarketplace," she said in a statement.

The department's investigative task force will work closely withthe state attorney general's office and will require a group ofbrokers to turn over all information regarding compensation and feearrangements, Ms. Bakke said.

Vinnie Funelas, a department spokesman, said the department hasrequested information from the state's top 30 brokers, includingMarsh, Aon, Willis, and Hilb, Rogal & Hobbs. The department'sinvestigation is being done apart from the National Association ofInsurance Commissioner's task force investigation of the brokerfees, which New Jersey is a part of.

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

The number of investigations and subpoenas issued are growing asmore 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'sbrokerage firm, Marsh, engaged in price-fixing, bid-rigging andmanipulation of the placement of insurance contracts in return forprofitable contingency fees from certain carriers.

Of the 10 states with the highest direct written premium ascompiled by Highline Data, New York, California, New Jersey andOhio are conducting active investigations where both the insurancedepartments and the attorney general offices are involved.

In Texas, the department issued a statement on its Web sitestating it is looking into the matter and would have no othercomment.

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

A spokeswoman in Florida said the department has beguninquiries.

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

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

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

Oregon's Department of Consumer & Business ServicesInsurance Division spokesman Steve Corson said the department hasconsulted with its attorney general and issued a press releaseasking for any information from individuals who feel they may havebeen the victim of bid-rigging or other similar practices. He saidthe department and the attorney general are still in the initialphase of their action.

Maine's Superintendent of Insurance Alessandro A. Iuppa said hisdepartment is waiting for the uniform template of questions beforebeginning its inquiry. He said he was not aware of any actionscontemplated by the attorney general there.

National Underwriter has identified 17 companies thathave received subpoenas from the attorney general in either NewYork 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 companiespointed out that the requests were for information only and not anindication of any wrongdoing. CNA's Chairman and Chief ExecutiveOfficer Stephen W. Lilienthal pointed out that in New York's suit,it was noted that an executive was asked to provide false quotesand refused. The company's paper was later used in a false quotewithout its knowledge; he noted, "We were not pleased to learnabout this."