Spitzer Focus on Personal Lines Concerns Agents

Testifying before a special hearing of the New York State Assembly Insurance Committee in New York City on Friday, Mr. Spitzer said only the "public focus" of the probe has centered on commercial lines.

"We have an ongoing set of investigations into other lines, including personal lines, that will come out in due course," Mr. Spitzer said.

Nonetheless, any wholesale tinkering with personal lines compensation formulas has people such as Sharon Emek, treasurer of the Independent Insurance Agents and Brokers of New York, concerned about the future.

In testimony on Friday, she took special pains to point out the difference between profit-sharing arrangements that benefit independent agents and Market Service Agreements, which have been at the heart of the Marsh scandal.

Noting that MSAs are based solely on volume, she said they could "lend themselves to so-called steering of business by unethical brokers to insurance companies with the most lucrative compensation arrangements."

"Profit-sharing agreements, on the other hand, are based on annual performance criteria and take into account other factors in addition to volume," Ms. Emek said. "Profitability, growth and retention are common factors that are considered in profit-sharing agreements."

Assemblyman Alexander Grannis, D-Manhattan, who chairs the Assembly Insurance Committee, expressed concern that the existence of such arrangements could lead agents to steer business to companies that might not be in the insured's best interest.

Ms. Emek asserted that most of the arrangements with carriers are similar enough that it would not make that much difference.

"But the most important thing to remember is that the retention of our clients is our paramount concern," she said. "And to do that, we must give them the best coverage at the best price."

This was only one of many concerns of both the attorney general and Mr. Grannis, which also included the relationship between insurers and reinsurers who are based offshore and are beyond the jurisdiction of state regulators and legislators.

Mr. Grannis admitted as much after the hearing when he told National Underwriter that a legislative package he plans to prepare in the wake of the scandal would have to await the full outcome of Mr. Spitzer's probe.

Mr. Grannis said he would also await recommendations from New York's insurance superintendent, but that he would not be held to them. Those recommendations could be delayed while the department undergoes a transition from the outgoing superintendent, Greg Serio, to his successor, former Republican Assemblyman Howard Mills.

However, any Assembly proposal would face an uphill battle with a Republican-controlled State Senate and a Republican Governor.

But one thing that seemed certain was that the disclosure approach called for in the National Association of Insurance Commissioner's broker fee model act would not cut it with either Mr. Grannis or Mr. Spitzer.

"I've never been a big fan of NAIC's take-it-or-leave-it models," said Mr. Grannis.