U.S. insurers battle back against Spitzer claims

U.S. insurers had their chance to refute claims of widespread industry deception about their relationships with brokers when Property & Casualty Insurers Association of America (PCI) CEO Ernie Csiszar spoke before a Senate subcommittee this week.Csiszar’s comments came the same day New York Attorney General Eliot Spitzer also spoke to the subcommittee of the Senate Committee on Government Affairs, telling legislators that he thinks there is widespread corruption in the industry, specifically with regards to broker compensation. Spitzer also detailed the civil suits he has filed against broker Marsh and life broker Universal Life Resources as a result of his investigation into commissions Spitzer alleges Marsh was involved in bid-rigging, but is also attacking the industry’s use of contingent commissions by calling them a conflict of interest.”Individuals and companies that engage in illegal bid-rigging and price manipulation should be prosecuted to the fullest extent of civil and criminal law,” Csiszar told the Senate subcommittee. “But we reject the notion that incentive compensation creates a conflict of interest. On the contrary, it encourages agents and brokers to keep consumers in touch with the best service, risk management, and pricing.”He stresses that the alleged bid-rigging has only been identified as pertaining to a few individuals and must be distinguished from the long-standing industry practice of contingent commissions. In the case of such commissions, he allows, full disclosure should be the order of the day. “To ensure open and competitive markets, consumers should understand the relationships of the parties, be aware of options in the market, and have access to accurate, unbiased, and timely information,” he says.He urged legislators not to paint the entire industry in a negative way based on the actions of a few individuals, and stressed that any reforms should focus on the consumer’s right to information, rather than subjecting the industry to restrictive regulation. “Consumers’ best interest will be met by ensuring that they have maximum information, not by taking away agents’ and brokers’ incentives to serve them.”