For Immediate Release
December 27, 2004
Acting in concert with a task force convened by the National Association of
Insurance Commissioners (NAIC), Office of Financial and Insurance Services (OFIS)
Commissioner Linda A. Watters today announced that OFIS will participate in
the nationwide investigation of contracts, compensation agreements and business
practices by requesting information from insurers in Michigan. This action comes
in response to significant allegations related to “bid rigging,”
inappropriate “steering” or other inappropriate solicitation activities
engaged in by certain insurance companies and agents.
“Insurance buyers deserve to know that they aren't being scammed,”
said Watters. “Serious allegations regarding bid rigging in New York compel
further investigation here in Michigan.”
The NAIC task force developed specific questions to be used in a survey of
domestic insurers. All states will use some form of this questionnaire, and
will consolidate the information gathered to determine the actions and bid practices
of domestic insurers. The investigation requires that certain licensed domestic
insurers turn over any and all information regarding compensation and fee arrangements
with insurers. This information must be reported to OFIS by January 17, 2005.
Nationwide, this investigation has focused on brokers. Brokers in many states
contract directly with consumers to place insurance. In Michigan, though, agents
or producers that are appointed by insurers place most insurance. The investigation
concerns brokers that have their primary obligation to consumers, but get kickbacks
from insurers. While brokerage arrangements are not common in Michigan, it is
important to make sure those arrangements are working openly and fairly where
they do exist, such as in the surplus lines market for hard to place risks.
Watters said, “We will ensure that insurance consumers have confidence
that their insurers are not engaged in illegal bid rigging.”
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