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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