New York State Attorney General Eliot Spitzer, who has made a name for himself investigating the way in which financial services firms do business, is now taking on the insurance arm of the industry.
In mid-October, Spitzer sued Marsh & McLennan Cos., one of the country's leading insurance brokerage firms, for fraud and antitrust violations, charging that Marsh cheated its corporate clients by rigging bids and sending business to insurers with whom it had payoff agreements.
Spitzer said in a press release that the allegations laid out in the suit are not unique to Marsh. “The insurance industry needs to take a long, hard look at itself, “Spitzer said. “If the practices identified in our suit are as widespread as they appear to be, then the industry's fundamental business model needs major corrective action and reform.”
Several major insurance companies, including American International Group Inc., Ace Ltd, Hartford Financial Services Group Inc., and Munich-American Risk Partners, are named in the suit as participants in steering and bid rigging.
In the days following Spitzer's announcement, attorneys generals in other states, including Connecticut and Massachusetts, launched their own probes.
What the effect of the investigations will be on industry meetings is unclear, but the issue is certainly on planners' radar screens. Said one high-level insurance planner, “It's bound to have an impact any time your CEO is locked up for hours with attorneys.”