State lawmakers have been feisty this month. On Friday, I blogged about how one leading legislator challenged the National Association of Insurance Commissioners on whether its accreditation program usurped state authority. Today I spotlight a brewing controversy over whether state attorneys general went too far in negotiating settlements with insurance carriers over the payment of contingency fees to brokers that reverberated beyond their own borders.

(To access the full NU story by our own Steve Tuckey on this development, click here.)

Although the National Conference of Insurance Legislators postponed a vote on a resolution challenging the AGs, they raised a very interesting question just by debating the issue: Do state attorneys general have the right to restrict behavior nationwide with settlements they strike on behalf of their own jurisdictions?

The resolution's sponsor–Georgia Rep. Rich Golick, R-Smyrna–charged that a small group of attorneys general and insurance regulators have recently undermined and evaded the legislative process by using legal settlements with insurers and large brokers to unilaterally implement public policy measures.

The Independent Insurance Agents and Brokers of America lobbied for an immediate vote, arguing that any delay would further harm innocent producers whose livelihood has already been jeopardized by AG-imposed agreements. The deals force carriers to stop paying certain types of bonus commissions to all intermediaries, when only a handful at the mega-brokerages were involved in bid-rigging and improper steering of clients to trigger volume-based contingency fee deals.

Some of the settlements reached by some AGs and regulators with big insurance companies and the largest brokers include provisions that are essentially lawmaking, charged Wes Bissett, the Big I's senior vice president. He called such moves “the kind of measure that ought to be approved and adopted by a legislative body. The main settlements have been negotiated by three attorneys general, yet they have been applied nationwide, and there has been no opportunity for comment.

This may be an attempt to shut the barn door after the horses, cows, chickens and geese have all taken off, but it is a discussion worth having. Just who is in charge of insurance industry behavior, anyway?

Special Reports /

Let The Turf War Begin, Take Two!

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