FOR IMMEDIATE RELEASE
SUPERINTENDENT GREGORY V. SERIO'S REMARKS - OCTOBER 14, 2004
Id like to commend Attorney General Spitzer and his staff on securing guilty pleas in criminal cases brought against two insurance executives and for furthering the fight for fairness in insurance sales practices. Id also like to thank my staff, especially Audrey Samers, the Insurance Departments Deputy Superintendent and General Counsel, and our Consumer Services and Property Bureaus.
The civil lawsuit the Attorney General filed today addresses issues that the New York State Insurance Department has been concerned about for some time. In fact, the Insurance Department was one of the first regulatory agencies to require, since 1998, that brokers disclose to their customers all compensation arrangements. In this way, customers understand the costs of coverage and the motivation of their broker in placing the business with certain insurers.
However, even after the disclosure rules were put in place, the Insurance Department received complaints of non-disclosure and reports of multiple compensation arrangements on single placements of coverage.
Since that time, the Insurance Department has been working collaboratively with the Attorney Generals office to investigate, and now prosecute, these actions.
Indeed, the Department appreciates the close working relationship it has had with the Attorney General throughout these investigations. The New York State Insurance Department was involved in data collection and analysis, a review of relevant insurance laws and practices and, finally, the Departments letter to the Attorney General last month authorizing his office to issue subpoenas with regard to suspected criminal anti-trust violations among insurance companies and brokers. All contributed to the actions announced today. These alleged violations include fraud, undisclosed payments and unlawful restriction of competition in the award, marketing and provision of insurance policies.
Perhaps the most disturbing aspect of our findings is that these crimes and improper actions harmed so-called sophisticated insureds, large insureds that seemingly do not need all of the protections that strong state regulation provides. And, more importantly, this was occurring during a period known as a hard market, where insurance was already difficult to find and when commercial casualty rates were otherwise increasing.
Well, we now know that even the most sophisticated insureds, large and small, can be fleeced, and all insureds who buy insurance need to be vigilant that their brokers and carriers are acting appropriately.
The New York State Insurance Departments position on this matter is cleara brokers undisclosed receipt of additional compensation constitutes a dishonest and untrustworthy practice. Today, we remind all in the broker community that this standard applies to them and that New York State will not tolerate any criminal or improper behavior in its insurance markets.