Scandal in the Industry

The industry was rocked weeks ago with the announcement of New York Attorney General Eliot Spitzer’s charges against Marsh & McLennan. While Spitzer’s probe had been known for some time, the unexpected results shook the industry with its own Enron-type scandal.

Looking over Spitzer’s complaint, even I was taken aback by the details of his investigation. (If you have not yet read it, it’s a must–view it online at http://www.oag.state.ny.us/press/2004/oct/oct14a_04.html.) Accusations of bid-rigging, threats, and other unfair business practices filled the 31 page report. It also reveals the names of suspected insurers involved with Marsh’s bid-rigging scheme, and those companies which Spitzer found no alleged wrong-doing.

Following Spitzer’s allegations, California Insurance Commissioner John Garamendi released his own proposed regulations designed to tighten his rein on agents and brokers. The regulations would more or less that ensure that brokers provide full disclosure to the insured, as well as providing the “best-available” insurance to consumers.

In Oregon, Commissioner Joel Ario also said the state is considering implementing a new package of regulations for brokers to disclose conflicts of interest to customers upfront.

The good news is, the regulations in California have little chance of actually becoming law as they are currently proposed. The bad news, you can be assured that there will certainly be change in the industry in respect to the disclosure of agent and broker commissions.

While the Spitzer charges are certainly not indicative on how agents and brokers in Calirofnia, or for the rest of the nation, for that matter, conduct business on an everyday basis, the scandal is not exactly helping consumer’s already long-time distrust of the industry. It only takes one or two bad apples to paint a generalization of the entire industry to a consumer.

So what can you do as an agent or broker to quell your customers’ concerns? Assure them that you are always acting in an honest and ethical manner, and that their best interests are top priority for you.

Other things you can do are help educate your customers on how the industry works. Have printed material available that explain how the industry works. Take an extra 10 minutes with a customer to explain to them why their premiums have gone up. It may seem burdensome, but it will increase customer trust and in the end, loyalty.

Thanks for reading.

Topics Agencies Legislation