Blumenthal Calls For New Insurance Regulations

HARTFORD (AP) — State Attorney General Richard Blumenthal proposed new regulations on the insurance industry Tuesday that would make the state’s insurance commissioner an elected official.

Under current law, the insurance commissioner is an appointee of the governor. Blumenthal said his proposal would provide “strengthened accountability for the insurance commissioner and the entire system so there will be better consumer protection,” he said.

Twelve other states elect insurance commissioners, he said.

Blumenthal also proposed a series of other reforms in response to charges that some insurance companies have paid illegal fees to brokers who steered clients to them.

Blumenthal wants: a code of responsibility for insurance brokers and agents; a mandatory requirement that insurers disclose all compensation to brokers or agents; and a requirement that brokerage fees be paid by consumers, not insurance companies.

“I am proposing in legislation to commit to a major structural change in the insurance department so regulations would be made more effective and real,” he said.

Gov M. Jodi Rell submitted her own regulatory proposals in the two-year budget she presented to the General Assembly on February 10, said Kate Kiernan-Pagani, spokeswoman for the Connecticut Department of Insurance. The plan mirrors regulations drafted by the National Association of Insurance Commissioners, which represents state insurance regulators.

The NAIC model includes a requirement that brokers disclose compensation from the insurer to their customers.

But Blumenthal said the NAIC proposals “fail to go far enough.”

The push for change follows investigations by Blumenthal and other state attorneys general, including a civil lawsuit by New York Attorney General Eliot Spitzer against Marsh & McLennan Companies Inc, the nation’s largest insurance brokerage.

The lawsuit also implicated several other major insurance companies.

Spitzer and other critics have said brokers took payoffs from insurance companies to steer corporate clients their way rather than get the best prices for policies, as they are required.

The agreements — also known as contingent commissions or placement service agreements — are above ordinary commissions that brokers legally receive from insurance companies.

Marsh agreed last month to pay $850 million in restitution to end Spitzer’s investigation.

Blumenthal said an elected commissioner would establish “full transparency and accountability.”

“At the end of the day anyone in that position is accountable to consumers and taxpayers and will have to make full disclosure of rate decisions and other regulations,” he said.