Spitzer To Testify At N.Y. ?Brokergate' Hearing
By Daniel Hays
NU Online News Service, Dec. 2, 2:14 p.m. EST?New York Attorney General Eliot Spitzer, whose insurance brokerage probe rocked the industry, is due to testify Monday before a New York Assembly panel taking a pointed look at what its chairman has titled "Brokergate."
Assemblyman Alexander Grannis, D-New York, who heads the Assembly Insurance Committee, in a notice of the hearing in New York City, said "Brokergate" will look at "brokers, insurers, regulators and risk managers in the ongoing broker compensation scandal and a review of its impact on consumers."
The notice, describing insurance markets as shaken by "widespread fraud and corrupt practices," drew an immediate protest from Bernard Bourdeau, president of the New York Insurance Association in Albany who protested its "vivid language." He warned that a "knee jerk public policy reaction by legislators could disrupt the marketplace."
Mr. Grannis, a constant industry critic who has called insurers "clever hucksters," has outlined a series of tough questions he wants witnesses, who include New York Insurance Superintendent Gregory V. Serio, to answer.
Among the areas the hearing will probe, the notice said, are what "policy goal was achieved" by the state insurance department's "blessing" of additional broker compensation "as long as they were disclosed?"
In 1998 the department issued a circular letter saying compensation agreements should be disclosed, recorded, and internally audited, and promised to review the issue in market conduct investigations.
Mr. Spitzer's investigation of broker fees and commissions has led to charges that Marsh & McLennan Companies Inc.'s brokerage outlet made millions price-fixing and rigging insurance company bids.
The assemblyman's question list asks how such illegal activity was possible, "under the noses of State regulators, business executives and highly trained risk management specialists."
Christine Olli, associate director of the committee, said the panel is also going to call representatives and members of the agents, brokers, insurance and business communities.
Mr. Grannis said he wants to know if the state should legislate to outlaw broker contingency payments, whether current insurance law has strong enough penalties, and if it has the means to "prevent fines and financial penalties from simply being passed along to consumers?"
He also asks if N.Y. Republican Gov. George Pataki's efforts to deregulate commercial insurance transactions "square with the revelations of the Brokergate scandal?
The Assemblyman said he also wants to hear the status of ongoing insurance industry investigations and the likelihood "the same patterns of wrongdoing will emerge in other lines of insurance?"
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