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New York Attorney General Eliot Spitzer, leading a broad probe into insurance industry fraud and price-fixing, said Friday he intends to pursue criminal charges against executives as high as possible up the corporate ladder.
Following testimony at a New York State Assembly insurance committee hearing Friday, Spitzer told reporters his probe would ultimately land even bigger fish.
"We are moving forward very aggressively with criminal cases against individuals and will pursue those as far up within the structure of these companies as we possibly can," he said.
Spitzer says brokers and consultants have corrupted insurance markets by collecting so called placement fees, steering business to those insurance carriers paying the most. Such schemes restrict competition and result in higher premiums for consumers, Spitzer said.
Spitzer told state lawmakers his investigation would eventually touch on bid-rigging in every type of insurance such as casualty, life, medical, and aviation. One major track for the investigation involves personal insurance, where it has been uncovered that similar bid rigging and pay-for-play schemes have been taking place. Spitzer expects the probe, which has already affected reforms at Marsh and other brokers, will prompt more such changes.
"There will be an impact. There will be disclosures I think will change the way business is done," hesaid. "These contingent commission fees and the lack of transparency have inured to the detriment of individuals who have paid premiums that were higher than they would have otherwise have been."
Spitzer also noted his concern that insurers based overseas, or in offshore havens such as Bermuda, are outside the state's regulatory reach though they do business in New York. He said state and U.S. lawmakers should consider new rules that could improve regulators' capacity to gather information from these companies.
Congress "should examine the international impact of vertical integration that we're seeing," he said. "This shifting of control to offshore entities that have an impact on our domestic insurance markets," is something that should be studied.
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