November 07, 2024
Business

Insurers face state probes of sales practices

SACRAMENTO, Calif. – California’s top insurance regulator said Wednesday that he will be filing a civil suit shortly in the widening scandal over insurance industry sales practices.

State Insurance Commissioner John Garamendi also said he expects the investigation to widen beyond the property and casualty lines targeted in a suit filed last week by New York Attorney General Eliot Spitzer alleging price fixing and bid rigging. These could include life and health policies as well as auto and home insurance.

“As we moved forward with that we have discovered problems in other areas,” he said.

On Tuesday, disability insurance firm UnumProvident Corp., which has offices in Portland, Maine, said it had also received subpoenas from Spitzer.

“This department, the New York [insurance] department, the attorney general in New York and insurance commissioners across the nation are pursing many different paths,” Garamendi said.

“We have opened the first couple of pages in a very long and sordid book. The early indication is it’s an extremely serious breech of trust … by some of the largest and most well-known insurance companies and brokers in America.”

Garamendi did not give the names of companies he expected might be involved, but said, “I would expect to see virtually every line of insurance investigated.” He also said he believed consumers and businesses should be reimbursed if investigations prove they were victims of bid rigging or other illegal activity.

Garamendi said he was working with Spitzer in developing his case. He also said a number of state insurance commissioners took part in a conference call Wednesday morning to “coordinate investigation activities.”

Spitzer last Thursday filed a civil suit accusing the Marsh & McLennan Cos. Inc. brokerage of bid rigging and using incentive fees to manipulate the sales of corporate property and casualty policies. As a result, businesses have paid more than necessary for their coverage. Spitzer pledged to look at other forms of insurance, too.

Marsh & McLennan has suspended four workers whose names have been connected with Spitzer’s lawsuit, The Wall Street Journal reported Wednesday.

A company spokesman declined to comment on the report.

Liberty Mutual Insurance Co., one of the nation’s top property and casualty insurers, said Wednesday it has been subpoenaed as part of Spitzer’s investigation.

Liberty Mutual said in a statement that it was conducting its own internal review of sales practices and cooperating with Spitzer’s probe. The company said its investigators “have found no evidence of bid rigging or other illegal practices.”

Meanwhile, Dutch-based ING Groep NV, one of the world’s largest insurers, said it had received a subpoena from Spitzer’s office.

In addition to New York and California, other states have launched their own investigations.

Connecticut Attorney General Richard Blumenthal’s office on Tuesday issued at least 20 subpoenas to insurance companies and brokers and up to 10 more on Wednesday.


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