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On Tuesday, November 16, the Subcommittee on Financial Management, the Budget, and International Security of the Senate Committee on Governmental Affairs held an Oversight Hearing on "Insurance Brokerage Practices, Including Potential Conflicts of Interest and the Adequacy of the Current Regulatory Framework." Retiring Sen. Peter Fitzgerald (R-IL) chaired what was undoubtedly his final Senate hearing.
The first panel of witnesses included: New York Attorney General Eliot Spitzer, Connecticut Attorney General Richard Blumenthal, California Insurance Commissioner John Garamendi, and New York Superintendent of Insurance Greg Serio. The second panel of witnesses consisted of a representative from each of the following groups: insurance carriers (PCI), large corporate purchasers of insurance policies (RIMS), large and small insurance brokerage firms (CIAB and The Big I), and consumers (CFA).
The hearing focused on the issues of whether a conflict of interest arises when insurance brokers receive contingent commissions and whether the current regulatory framework is sufficient to prevent the fraudulent abuses of price fixing, bid rigging, and deception alleged in recent lawsuits initiated in New York and elsewhere.
Each of the four state officials on the first panel rejected federal preemption as a solution to the recent insurance fraud investigations. However, both Attorneys General Spitzer and Blumenthal welcomed more federal cooperation in regulating anti-consumer practices by eliminating federal antitrust immunity for insurance brokers.
Spitzer agreed with the Chairman's statement that contingent commissions are "not in and of themselves improper." Spitzer added that disclosure is required to ensure that the client's interests are fairly represented; yet, he said, his investigation has revealed that in addition to inadequate disclosure regarding commissions, brokers are actively making misleading statements.
Similar to the first panel, there was no consensus among the witnesses on the second panel regarding the kind of insurance regulatory regime there should be in response to recent revelations. Chairman Fitzgerald asked each member of the second panel whether he or she supports or opposes a ban on brokers receiving contingent commissions. Each of the witnesses opposed the ban except the witnesses from RIMS and CFA.
The first panel of witnesses included: New York Attorney General Eliot Spitzer, Connecticut Attorney General Richard Blumenthal, California Insurance Commissioner John Garamendi, and New York Superintendent of Insurance Greg Serio. The second panel of witnesses consisted of a representative from each of the following groups: insurance carriers (PCI), large corporate purchasers of insurance policies (RIMS), large and small insurance brokerage firms (CIAB and The Big I), and consumers (CFA).
The hearing focused on the issues of whether a conflict of interest arises when insurance brokers receive contingent commissions and whether the current regulatory framework is sufficient to prevent the fraudulent abuses of price fixing, bid rigging, and deception alleged in recent lawsuits initiated in New York and elsewhere.
Each of the four state officials on the first panel rejected federal preemption as a solution to the recent insurance fraud investigations. However, both Attorneys General Spitzer and Blumenthal welcomed more federal cooperation in regulating anti-consumer practices by eliminating federal antitrust immunity for insurance brokers.
Spitzer agreed with the Chairman's statement that contingent commissions are "not in and of themselves improper." Spitzer added that disclosure is required to ensure that the client's interests are fairly represented; yet, he said, his investigation has revealed that in addition to inadequate disclosure regarding commissions, brokers are actively making misleading statements.
Similar to the first panel, there was no consensus among the witnesses on the second panel regarding the kind of insurance regulatory regime there should be in response to recent revelations. Chairman Fitzgerald asked each member of the second panel whether he or she supports or opposes a ban on brokers receiving contingent commissions. Each of the witnesses opposed the ban except the witnesses from RIMS and CFA.