Spitzer To Air Broker Scandal At U.S. Senate Hearing

The hearing is being convened by Sen. Peter Fitzgerald, R-Ill. It is titled, "Oversight Hearing on Insurance Brokerage Practices, Including Potential Conflicts of Interest and the Adequacy of the Current Regulatory Framework," and is Sen. Fitzgerald's last proceeding as chairman. He did not run for re-election this year.

Sen. Fitzgerald's subcommittee has no legislative jurisdiction over the insurance industry. However, both a congressional staffer and an industry lobbyist said it is not altogether uncommon for members of Congress to hold hearings on issues where there is no legislative responsibility, particularly when these issues are perceived to be in the limelight.

Briefing reporters on his testimony today, Ernst Csiszar, president and CEO of the Property Casualty Insurers Association of America, warned that, "This is going to be one of a number of hearings on this [broker insurance conduct] issue. I presume you are going to see more hearings in various committees." He then added that he will meet Thursday with Rep. Mike Oxley, R-Ohio, chairman of the House Financial Services Committee, to discuss the probe..

At the same briefing, Robert Rusbuldt, CEO of the Independent Insurance Agents and Brokers of America, said that the hearing being convened by Sen. Fitzgerald, "was not requested by the Republican [Senate] leadership, and to my understanding, the leadership was not even aware of it."

Mr. Rusbuldt added, "This is all coming from Sen. Fitzgerald. It is an unusual hearing, as it is being convened by during a lame duck session by a lame duck senator." Mr. Rusbuldt suggested that Sen. Fitzgerald convened the hearing because he held a similar one regarding the findings of abuse of consumers in the mutual fund industry laid bare by Attorney General Spitzer. Something peaked his interested, and he wanted to be involved."

Mr. Spitzer, who has investigated with the New York Insurance Department, has filed lawsuits and secured guilty pleas from insurance executives that have rocked the industry and sent company prices into the tank. His suits have accused major property-casualty as well as life insurers with paying incentive fees to brokers who steered customers to companies that provided payoffs rather than securing clients the best deal.

The lobbyist added, "As a lame duck himself, no one in the insurance community is afraid that this is going to lead to any specific federal legislative activity." But, the lobbyist said, "giving Mr. Spitzer a forum in such a favorable environment will certainly cause further reputational damage to the industry at a particularly unwelcome time, and is not likely to advance the public discourse on this issue to any degree."

The hearing will consist of two panels, the first of state attorneys general and regulators, and the second of representatives of industry trade and consumer groups.

Joining Mr. Spitzer on the first panel will be Connecticut Attorney General Richard Blumenthal and New York Insurance Superintendent Greg Serio, who is also representing the National Association of Insurance Commissioners as a member of the Executive Task Force on insurance brokerage issues.

Mr. Serio is expected to unveil in some detail a proposed model law dealing with the alleged abuses being probed by Mr. Spitzer that the NAIC will seek to have all 50 states adopt.

The substance of the proposed model law has not been disclosed. John Garamendi, California insurance commissioner, is also scheduled to testify. He has followed up the findings of Mr. Spitzer's probes of insurance brokerages by calling for far greater disclosure of all fees and commissions paid to agents and brokers for selling insurance products.

Representing the industry will be officials of the Property Casualty Insurers Association of America, the Independent Insurance Agents and Brokers of America, and the Council of Insurance Agents and Brokers. Also scheduled to testify are Robert Hunter, director of insurance for the Consumer Federation of America and an official of the Risk and Insurance Management Society. The latter represents the purchasers of commercial insurance products.