"I was astonished and shocked by some of the conduct we uncovered," Blumenthal said, adding that he has sent out 20 subpoenas and intends to propose legislation requiring either detailed disclosure or the elimination of contingent commissions.
Garamendi said, "The customers and consumers in this nation, from the largest corporations to the smallest mom-and-pop in their homes, have been denied the opportunity for the best deal on insurance."
Unlike the mutual funds and investment banks that were the targets of Spitzer's previous investigations, insurance is regulated primarily on the state level. So Spitzer needs the cooperation of his counterparts in other states and state insurance commissioners to force industry-wide change.
"We look forward to close cooperation with insurance commissioners around the nation. We view this as the only way to get to the bottom of all this," said Spitzer spokesman Darren Dopp.
The state insurance commissioners' teleconference yesterday was the first of a series to coordinate investigations of the contingent commission issue. The commissioners have worked in concert before on national issues and are trying to avoid hitting the industry with multiple requests for the same information, said Connecticut Commissioner Susan Cogswell.
Virginia regulators are scrambling to figure out how and whether the allegations affect local residents. The state requires insurance agents and consultants to disclose their compensation, but it does not regulate pure brokers, said Ken Schrad, spokesman for the State Corporation Commission, which includes the insurance bureau.
District law makes clear that insurance brokers must act in the best interest of their clients, said Insurance Commissioner Larry Mirel, adding that his office is now investigating whether any local brokers have breached that requirement.
Maryland Commissioner Alfred W. Redmer said his office has seen no examples of bid-rigging in this area. He now plans to do what he calls "outreach" to carriers and brokers in the state to make clear "we will not tolerate individuals engaging in inappropriate activities."
Some industry analysts said that in the end the scandal will hit insurance sellers -- brokers, agents and consultants -- much harder than the carriers themselves. That's because contingent commissions are a revenue source for brokers but a cost for insurers.
Marsh already has renounced contingent commissions, which brought in $845 million last year. AIG and Ace have said they won't pay the fees, and many industry insiders say the other big carriers may not be far behind.
"The other insurance companies are sitting back and loving this. . . . They're not going to be paying these enormous commissions" anymore, said Steve Schreckinger, head of the insurance practice at Palmer & Dodge, a Boston law firm.
But other industry experts aren't so sure that contingent commissions will disappear because some carriers rely on the agents to evaluate the quality of the customer and send them good business, said University of Georgia professor Robert E. Hoyt.
