A PC Ethics Group? Insurer Groups Cautious

Mr. Serio, speaking to the Anderson Kill and Olick Policyholder Advisory Conference, said the life marketplace actions following a 1993 scandal over unethical sales tactics provided a "perfect template" for the p-c sector to follow.

Mr. Serio's department has been part of an investigation by New York Attorney General Eliot Spitzer, which has led to civil and criminal charges that major insurers, as part of a price-fixing scheme, paid kickbacks to Marsh, Inc. brokerage that were labeled fees and commissions.

The p-c industry, Mr. Serio said, needs a compliance mechanism, adding that when New York's investigation got underway, insurers had failed to point out the "bad guys" in their midst.

In reaction to Mr. Serio's proposal, a representative for Property Casualty Insurers Association of America quoted its president, Ernst Csiszar, as stating that PCI "would hope that the formation of such an organization would be taken seriously by state regulators, and that the results of its monitoring practices would impact how regulators view an insurer's practices in a variety of areas, including market conduct."

The spokesman added that the Des Plaines, Ill.-based PCI believes "the implication that the entire industry is guilty of engaging in these illegal actions is an overstatement. Based on the sheer number of companies, agents and brokers, the insurance industry is highly competitive."

However, he added, "the three top brokers account for almost 80 percent of the commercial market placements, affording them considerable leverage with their buyers and sellers. Such concentration and leverage is not present in other segments of the market, as evidenced by the 2,700 insurers and the 1.9 million resident agents and brokers licensed in the United States. Nor is it present in the reinsurance arena. Painting all companies, agents and brokers with the same brush simply isn't fair."

Chuck Chamness, president of the National Association of Mutual Insurance Companies in Indianapolis, said it is "premature to determine whether the property-casualty industry needs an IMSA, but it is something we will look at and consider through our processes."

Mr. Chamness said he thought Mr. Serio was "wise to suggest a private-sector solution. There's a distinct possibility here of overreaction and over-regulation."

He added that "this speaks to the need to establish a self-evaluative privilege for insurance companies that would require a company to audit and correct problems themselves or risk regulatory sanctions."

Julie Rochman, speaking for the American Insurance Association in Washington, said the organization had no immediate reaction without something in writing from Mr. Serio, but that "anything the superintendent puts out, we will look at."

She also remarked that the life and p-c sectors were "different businesses."

Although Mr. Serio has held up the life industry reaction to its early 1990s scandal as a model, he noted that its IMSA group does not make membership compulsory, so not all the carriers belong. Given some of the issues that have arisen concerning insurers, "you have to wonder why," he said.

The independent IMSA looks over insurer practices and gives them a seal of approval if they pass scrutiny.

In addition to examining p-c insurers and brokers, the New York inquiry that is underway has also subpoenaed large life insurers.