In response to my March 10 blog entry, "What Goes Around, Comes Around," Gary Wolcott, director of communications at the Professional Insurance Agents Western Alliance, lamented about how much damage Eliot Spitzer did to innocent independent agents with his crusade against big broker abuse of legitimate contingent compensation deals. I invited him to elaborate, and his musings follow. While he may be preaching to the choir, his commentary on Mr. Spitzer's legacy are worth repeating. Read on, and please share your own take.
Spitzer’s Legacy Leaves Independent Agents Damaged
BY GARY WOLCOTT
Eliot Spitzer resigned after only 14 months as New York’s governor in the wake of a prostitution scandal. Yet in spite of the negativity surrounding Mr. Spitzer’s exit from politics and his controversial career as a crusading attorney general, he did some very good things for insurance and for the financial services world in general, although many innocent independent agents paid an unfair price.
Mr. Spitzer cleaned the clocks of insurance and brokerage firms “allegedly” committing the serious crimes of bid-rigging and cooking the books. (We must use the word “allegedly,” because under the settlements, the companies did not admit guilt.)
However, Mr. Spitzer’s legacy is an entirely different matter.
My association—the PIA—agreed with Mr. Spitzer and others who went after these wrongdoers. Criminal behavior in this industry should not be tolerated at any level.
Unfortunately, he and other regulators jumping on this bandwagon were so busy headline-hunting that they didn’t see—or probably even care about—what their actions were doing to the insurance industry.
The real losers in Mr. Spitzer’s crusade are the nation’s independent insurance agents—the honest, law-abiding businesses that made the companies Mr. Spitzer took on rich. So, what did Mr. Spitzer do?
To start with, he took away those “evil” contingent commissions. His push to prosecute caused insurance regulators to put the squeeze on insurers and independent agents via new disclosure regulations and the loss of legal contingency fees.
Regulators all started screaming for tough new laws, when it was obvious that the tough old laws worked just fine. What was needed was exactly what happened. Someone came along willing to enforce those tough old laws. Enter Eliot Spitzer. The companies committing the crimes were caught. They were punished. That’s the purpose of law.
Now we have tough new laws. If the matter wasn’t so serious, it would actually be laughable. As we all know, criminals will skirt the tough new laws just like those companies did with the tough old ones.
Meanwhile, what crimes did independent insurance agents commit? None. Yet without thinking twice, Mr. Spitzer and other regulators took away a big part of our livelihood.
Later they increased the face slap when those same regulators started to relax the contingency commission thumbscrews on some of the “allegedly” guilty firms.
Apparently justice does not flow downhill. While the companies caught a break, contingencies for independent agents were not restored.
Yes, we agree, the fines these firms paid were huge and they stung the bottom line, but they are large corporations with many resources. Most independent agents losing contingencies do not play in that ballpark. Larger agencies were able to work around the loss of 2 percent, but some smaller agencies could not—and faced with that loss of income, they went under.
Who really got hurt by the Eliot Spitzer crusade? Independent agents.
Another outcome of Mr. Spitzer’s narrowly focused actions was to put insurance under a microscope. We all became criminals in the eyes of the public.
Then along comes Hurricane Katrina, former Mississippi Sen. Trent Lott and lots more trouble. And who got hurt here? Insurance agents who care deeply for their clients, move heaven and earth when catastrophe strikes—people who are really heroes to consumers in a crisis.
That’s the legacy Eliot Spitzer leaves this industry. While the firms Mr. Spitzer took down continue to make billions, the independent agents who are pillars of their communities, whose generosity funds many a charity, whose civic pride leads them to accept leadership positions in their cities and counties, whose employment of thousands of equally honest individuals that contribute much to this nation’s economy are reviled.
Where is the justice?
Yes, Mr. Spitzer was kind to insurance as a governor. But so what? He and colleagues who leaped at the chance to get those insurance bad guys never defended the little people who take good care of their clients and who work so hard on their behalf.
In their headline-hunting haste, these officials forgot that these mega-brokers do business with the small businesses of this nation. As was stated earlier, we are the people whose hard work made those corporations rich. We’re also the people who pay a large share of the taxes that support these crusaders. We’re the people who put you—Eliot Spitzer—into office.
And now fate’s fickle finger is pointing the other way. Today there are hundreds, maybe thousands of insurance professionals having the last laugh. Eliot the Great has been humbled. Destroyed. His career is over.
It’s a shame, and such a waste. Government needs Eliot Spitzers. It needs people who stand firm and consider crime to be crime. We need people who espouse these values and keep them. We need fearless crusaders to take on big corporations and their big-gun lawyers.
But we—the people—also need government leaders and regulators with vision beyond the next office they seek. Eliot Spitzer used insurance and other financial institutions to go from attorney general to governor. During his campaign of reform, it doesn’t appear that he much cared about who he hurt to get there.
What is really important for the insurance industry and the public is what we learn from the world’s Eliot Spitzers.
Yes, we need crusaders, but we need crusaders to be fair and honest. We need men and women fighting for change to see the world in 360 degrees, and not in such narrow terms.
Crusaders need to know that there are trustworthy people at the point of sale that can be deeply hurt when changes are made to punish people at the top.
What do you folks think? You may comment below.
(Gary Wolcott is director of communications of the Professional Insurance Agents Western Alliance, based in Vancouver, Wash., representing four PIA chapters—Oregon/Idaho, Washington/Alaska, Montana and Arizona/California/Nevada and New Mexico. He may be reached at garywolcott@piawest.com.)
