With the growing canonization of Eliot Spitzer as business-corruption Dragon Slayer, New York State Insurance Department regulators also say they deserve some of the credit for exposing wrongdoing in the U.S. insurance industry.
Gregory V. Serio, New York state insurance superintendent, said regulators had been on the trail of "marketing service agreements," for several years prior to the tip that the attorney general's office received last spring, which set off the investigation that culminated in the complaints against Marsh.
Brad Maione, Spitzer's press officer, said a tip sparked the investigation almost a year ago. "We got a tip, we looked into it, and based on the findings we began an investigation," he said.
Insurance Department officials said the investigation into industry practices had been building for years.
"The (New York) Insurance Department was one of the first regulatory agencies to require, since 1998, that brokers disclose all compensation arrangements," said Serio, at a press conference in October, when the complaint was made public.
"However, even after the disclosure rules were put in place, the insurance department received complaints of nondisclosure and reports of multiple compensation arrangements on single placements of coverage."
The complaints, said Michael Barry, the department's director of public affairs and research, prompted Serio's office to send out a survey in the summer of 2002 to 150 insurers asking them if they had any marketing-service agreements with brokers. About 15 to 20 insurers said they had such agreements, said Barry.
"This was a significant number, because of course these were the biggest insurers, who handled large-volume accounts," said Barry. "These agreements were legal, they didn't break any law. And they were customary practice. But they definitely went against the spirit of transparency the 1998 disclosure rules sought to achieve."
With this information, the department investigated further. That led to the point at which its efforts dovetailed with the tip received by the attorney general's office last spring.
"We provided the information gathering and guidance on state insurance laws, and the attorney general's office used its subpoena and prosecutorial powers," Barry said.
"To not mention the invaluable role of the state insurance department in that landmark investigation is a disservice to the department's regulators," said the director of a New York-domiciled insurance company. "But more importantly, in the long run it dims the light on what clearly is a model of interagency cooperation that other states could effectively follow."
January 1, 2005
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