Are Eliot Spitzers Insurance Lawsuits Hitting the Wrong Targets?
On September 15, New York State Attorney General Eliot Spitzer indicted eight former executives from Marsh & McLennan Companies — Marsh itself was not charged — for their part in an alleged bid-rigging scheme involving insurance brokers who got insurance providers to submit inflated quotes that made customers think they had received the best price for their policies, when in fact they hadn’t. For Spitzer, bid-rigging is just part of the problem with the insurance industry. He says that another practice, contingent commissions, also artificially inflates the price of commercial insurance. Contingent commissions are extra payments, above ordinary commissions, that insurers funnel to brokerages in return for more business. Despite the fact that contingent commissions appear to be legal, Spitzer has linked them to kickbacks and is using his clout to get insurance brokerages to stop the practice. It is appropriate for Spitzer to investigate bid rigging, says J. David Cummins, a professor
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