Spitzer: Insurance scandal will worsen
WASHINGTON — Revelations of bid-rigging within the insurance industry may lead Congress to a “Pandora’s box” of unethical conduct, a top investigator told Congress on Tuesday, just before two more executives pleaded guilty.
New York Attorney General Eliot Spitzer, who launched an investigation Oct. 14 into major insurance brokerages suspected of price-fixing, told the Senate Governmental Affairs Committee that more disclosures of bad practices were coming.
“There have been criminal pleas entered, there will be more criminal pleas entered very shortly,” said Spitzer. There have also been high-level resignations and employee layoffs.
Hours after he spoke, two executives at Zurich American Insurance Co. pleaded guilty in New York to criminal charges, adding another major insurance company to the list of those implicated.
Senior underwriters John Keenan and Edward Coughlin pleaded guilty to misdemeanors for helping submit losing bids in order to steer business to a predetermined favorite. Both are cooperating with investigators.
Connecticut Attorney General Richard Blumenthal told the committee that small cities and towns may have been socked with excessive charges for property casualty, health and workmen’s compensation insurance that municipalities felt powerless to challenge. Those costs, he said, would ultimately be borne by taxpayers. His office is now culling information from local officials about their dealings with insurance companies.
Blumenthal insisted that state insurance laws, including Connecticut’s, should be “reinvigorated and reinvented” to combat fraud, illegal steering and bid-rigging. Specifically, he called for a new state code of ethics for both insurance brokers and agents, requiring them to tell clients about special compensation arrangements. He said any changes in federal regulations should not weaken the historic role of states in regulating the industry.
Insurance companies are supporting legislation that they say would create uniform, nationwide standards for the industry.
State officials have expressed fear that whatever legislation Congress writes will pre-empt, and may be weaker than, state regulation