The New York AG's suit against insurance broker Marsh & McLennan and other heavyweights may change the way the industry does business
America's biggest insurers have found themselves in the midst of a scandal that could change the very nature of the business. On Thursday, Oct. 14, New York Attorney General Eliot Spitzer charged Marsh & McLennan (MMC ), the huge financial-services firm and world's largest insurance broker, with fraud. In a civil complaint filed in New York State Supreme Court, Spitzer alleges that the firm engaged in bid-rigging, price-fixing, and accepted payoffs from insurers. Marsh's stock has plummeted -- it opened on Oct.14 at $46.01 but is trading on Oct. 15 at around $28.20, a drop of roughly 38%.
The scrutiny of the sales process at every insurer in the country has now begun. If you have a P & C policy on your building with Marsh, it might be worth getting a competitive bid now. This is going to be another lesson in Management 101.