PCI's Csiszar, Transparency May Have Barred Scandal

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 activities might have prevented the industry's expanding bid rigging scandal, Ernie Csiszar, president of the Property Casualty Insurers Association of America told National Underwriter.

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

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

He took note of a civil suit brought by New York Attorney General Eliot Spitzer, which charges that Marsh brokerage was guilty of rigging bids and price fixing with major insurers. The suit alleges Marsh had its customers buy insurance at inflated prices from insurers who kicked back to the brokerage.

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

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

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

According to Mr. Csiszar, the New York Attorney General's investigation was "greatly assisted" by the cooperation and coordination of the New York Insurance Department and Superintendent Gregory V. Serio, "who was credited by Mr. Spitzer for his agency's role in the effort."

Mr. Csiszar, formerly the South Carolina insurance director, told the trade associations' meeting that despite flaws in the state?based insurance regulatory system that federal regulation is not the solution.

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