An investigation of insurance company practices, including possible bid rigging and payments for steering business to certain companies, launched by the New York attorney general has spread to Maine and other states. That could be good news for consumers and businesses that have been paying rates that are higher than they should be.

New York Attorney General Eliot Spitzer last month announced that brokers and executives at several large insurance companies have engaged in improper and illegal activities. In one instance, a company asked employees of another insurance provider to purposefully offer a high bid so that the first company could win the business. In other instances, companies failed to inform customers that brokers, those who sell insurance policies, were paid fees by companies to direct business their way.

Mr. Spitzer is challenging the practice of fees – called contingent commissions or placement service agreement (PSA) fees – being offered to brokers from insurers. Mr. Spitzer said Marsh & McLennan, the first company to face a civil lawsuit, directed business to insurers on the basis of these fees rather than which insurer offered the best price. Last year, the company collected $845 million in PSA fees, more than half of the company’s total profit.

Several insurance company executives have resigned, some have been charged with crimes as the investigation grows and others have already pleaded guilty.

Maine Insurance Superintendent Alessandro Iuppa recently announced that Maine has joined a coordinated nationwide investigation. Investigators are currently gathering information, so it is too early to say if there were rule violations in Maine, Iuppa said.

Violations could mean that consumers, including town and states, paid more for insurance coverage than was technically allowable. “The average consumer ought to be alarmed and appalled by this potentially improper and illegal conduct,” Connecticut Attorney General Richard Blumenthal said recently. “Wholly apart from ethical considerations, this behavior has real-life consequences by pushing up the cost of everyone’s insurance.”

That was what caught the attention of Sen. Beth Edmonds of Freeport, who will take over as president of the Senate in January. She said, given the high cost of workers’ compensation and other insurance in Maine, she became concerned after reading news stories about the ongoing investigation. It is too soon to know if Maine residents or businesses have been affected by the improper practices. If they have been, tougher legislation is one fix.

The National Association of Insurance Commissioners is currently drafting model legislation to curb such abuses. It would require that brokers and agents disclose to potential buyers whether they are eligible for commissions and what those commissions would be. The legislation will be the subject of a public hearing at the group’s annual meeting next month. If it is approved by the association it may be presented to the Legislature in Maine and other states next year.

If it is, it should be enacted to avoid the egregious practices that Mr. Spitzer has uncovered.