Insurance Year in Review: East Edition

By | December 23, 2010

The touchy subject of agents’ commissions dominated headlines in 2010 — particularly in New York where regulators unveiled new rules that will force agents to reveal to clients how much they are paid.

That decision struck a major nerve within the broker community and two of the state’s trade groups for agents — the Independent Insurance Agents and Brokers of New York and the Council of Insurance Brokers of Greater New York — unsuccessfully sued the state’s insurance department to block the new rules.

The state’s other main trade group, The Professional Insurance Agents of New York, declined to join the suit — showing what is perhaps as growing schism in philosophy between the two groups. That lawsuit is already being appealed, but it would appear that come Jan. 1, agents throughout the state will begin having daily conversations with their clients about how much they get paid.

The suit was just the latest flash point in what was a near decade-long battle over how much insurance agents and brokers get paid. It dates back to the legal battles and settlements over contingent commissions and steering of clients between then-Attorney General Eliot Spitzer and most of the industry’s largest brokers and carriers.

At the same time, contingent commissions remained at the forefront of the industry’s mind as the three largest brokers — Marsh, Aon and Willis — were freed from restrictions in their Spitzer-era settlements and allowed to go after contingent commissions once again. Aon said that it would once again take the payments, and Marsh sad it would allow the payments at its retail agency business.

New York wasn’t the only state where agents were increasingly scrutinized this year. New Jersey increased penalties for agents who failed to report disciplinary actions, while in Massachusetts, Attorney General Martha Coakley unveiled plans to rein in underwriting and sales practices by agents and insurers

Expansion Plans

Despite a down market, many insurers and brokers throughout the East decided in many cases to try to grow or expand their businesses. New York-based Marsh & McLennan Agency continued its rapid expansion — which CEO Dave Eslick described to Insurance Journal this fall. In Boston, Liberty Mutual broke ground on a new building. In Connecticut, The Hartford pushed forward with plans to restructure its business. In New York, state regulators and insurance industry leaders began rehashing plans to relaunch the New York Insurance Exchange.

Noteworthy Claims and Settlements

Sadly, a number of tragic incidents through several East states and will likely produce some of the largest insurance payments in recent memory. In Central Connecticut, a mass shooting at a liquor distributor left eight people dead — a gruesome act that will likely result in some of the largest workers’ comp payouts in state history.

That tragedy followed on the heels of the explosion at the nearby Kleen Energy plant which killed six workers, injured 20 and damaged nearby buildings in an incident that produced one of the largest claims of the year for those who insure utilities.

Other states, too, produced some very large and memorable legal settlements in the last year. Among them:

  • In New York, first responders who were injured in the cleanup 9/11 finally agreed to a settlement worth upwards of $750 million.
  • In Massachusetts, the estate of a long-time smoker was awarded $81 million in punitive and $71 million compensatory damages.
  • In New Hampshire, a woman who was blinded and chemically burned by prescription drugs won a $21 million judgement.
  • In Virginia, a student injured in a lunchroom fight won a $5 million verdict

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