Resignations and investigations across the US

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Kitzmiller Resigns from American Agents Alliance

October 11, 2004

At a meeting of the American Agents Alliance Board of

Governors held

Oct. 7, it was announced that Alliance Executive Director

Lorelle Kitzmiller would be leaving the association,

effective immediately. Kitzmiller is the daughter of

Alliance founder Don .

During Kitzmiller's tenure, the independent producers

association experienced sustained growth, increasing its

membership and raising its profile, both in the insurance

community and in Sacramento. The Alliance's annual

Conference & Expo has grown to be one of the most well-

attended events of the industry.

Alliance President Nielson said, " I have had the

opportunity of working closely with Lorelle during my first

year as president, and I have observed her dedication to

independent insurance agents and brokers. She treated the

Alliance as if it was her own and she carried on the work

of her father who initially started the Alliance as a

privately-owned for profit association. The members of the

Alliance purchased the Association in 1997 from her father

and established it as a Mutual Benefit Corporation. At that

point Lorelle took the reins over from her father. I thank

her for her years of service and wish her the best in the

future. "

The Alliance's Board of Governors has appointed a special

search committee, which will began the process of hiring a

new executive director immediately.

Note: BESIDES BEING THE EXECUTIVE DIRECTOR OF THE AMERICAN AGENTS ALLIANCE,

(an organization of independant brokers whose fudiciary duty requires them to

work on the behalf of the insureds and NOT the insurer) MRS. KITZMILLER IS

ALSO THE WIFE OF KEN KITZMILLER, VP OF UNDERWRITING FOR MERCURY INSURANCE.

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Greenberg Out, Cherkasky In, at Marsh; Broker Vows to

Unveil 'Significant Reforms' Today

October 26, 2004

Jeff Greenberg The Marsh & McLennan board of directors

announced it has accepted the resignation of chairman and

chief executive officer W. Greenberg.

Stepping in to immediately replace Greenberg is G.

Cherkasky, named president and chief executive officer.

Cherkasky was also elected to the board of directors. He

will also continue in his current role as chairman and

chief executive officer of the company's risk and insurance

services subsidiary Marsh Inc.

The company also said it plans to announce

today " significant reforms in the business model of its

Marsh Inc. subsidiary which will be rooted in transparency

and under which Marsh will receive compensation for its

services from only one party: its clients. "

Formerly chief executive officer of Marsh Kroll, MMC's risk

consulting subsidiary, Cherkasky has served as a manager,

prosecutor, investigator, and trial attorney. He joined

Kroll in 1994, rising to the position of president and

chief executive officer in 2001. Prior to joining Kroll,

Cherkasky spent 16 years in the criminal justice system,

including serving as chief of the Investigations Division

for the New York County District Attorney's Office.

Cherkasky is leading MMC's role in the investigation of the

New York State Attorney General's charges being conducted

by Polk & Wardwell.

Marsh is among a number of insurers on the radar screen of

New York Attorney General Eliot Spitzer in his insurance

bid-rigging investigation, which has expanded to several

lines of insurance and several states.

Greenberg is the son of Maurice R. Greenberg, CEO of New

York-based American International Group (AIG), and the

brother of Evan Greenberg, CEO of Bermuda-based ACE.

According to MMC, a special committee of outside directors

has been formed to spearhead the company's activities in

resolving its legal and regulatory matters. F.

Erburu, former chairman of The Times Mirror Company, will

serve as chairman of the committee. The other committee

members are W. Bernard, formerly of Stanley &

Co., Inc.; Zachary W. , a partner at the law firm of

Dorsey & Whitney LLP and a former United States Attorney

for the Eastern District of New York; and R.

Hardis, former chairman of Eaton Corporation. Erburu has

also been named lead director of the MMC Board of Directors.

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Calif. Comm. Unveils 'Disturbing' Report on Wildfire Claims

Handling

October 25, 2004

Commissioner Garamendi released a new report Oct. 25

showing that survivors of the Southern California wildfires

who suffered total losses have filed formal complaints with

the Department of Insurance at a rate 22 times higher than

the normal rate of complaints.

A study of complaints for this report found that of the

2,734 " total-loss " claims filed with insurers following the

fires, 22 percent—or 676—generated complaints over the

handling of the claim by the insurer. Typically, the

Department receives complaints from about 1 percent of all

claims in most lines of insurance.

The report was completed after a survey of the top 76

insurers in the state, representing 95 percent of the

homeowners insurance market in Southern California. While

some of the disparity in the wildfire complaint numbers as

compared to normal claims may be attributable to the high

profile nature of the wildfires, Commissioner Garamendi

said that the numbers indicate that the system, in this

case, is not working as effectively as it could.

" This disturbing report, at the very least, demonstrates a

systemic problem of underinsurance that is happening

throughout the industry, " Commissioner Garamendi said. " At

worst, it indicates that insurers in many cases have not

held up their end of the bargain with fire survivors who

are looking to rebuild their lives. "

The report shows that 316 of the 676 complaints filed

involved underinsurance - when the coverage for a home does

not fully cover the amount it will take to rebuild.

Commissioner Garamendi's " Homeowners Bill of Rights "

addresses this and other problems found in the homeowners

insurance market, but more must be done, he said.

" Consumers all over this nation are finding that the

policies they bought for their homes do not adequately

provide coverage to rebuild in the case of a total loss, "

Commissioner Garamendi said. " Yet insurers already have

models that they say provide an accurate estimation of the

rebuilding cost. If that's so, why are so many people now

facing financial hardship because they are being forced to

pay much of the rebuilding cost from their own pockets? "

The report also documents a rebuilding process that has

been hampered by numerous problems, including the slow pace

of building permit issuances. Of the 2,691 homes destroyed

in San Diego County, only 655 have received permits to

rebuild so far, and only 150 have been rebuilt and approved

for occupancy.

In San Bernardino County, of the 659 homes destroyed, only

210 have permits for rebuilding, and only 16 have been

rebuilt. The Commissioner said that the problems

responsible for this slow pace vary, but insurers handling

of claims is a factor.

" People cannot rebuild if they haven't been able to settle

their claims with the insurers yet, " he said. " These people

need help now, and they need the appropriate amount of

cooperation from the insurers - otherwise, when their

additional living expenses money runs out, they may not

have anywhere to live. "

The October 2003 wildfires resulted in an estimated 3631

primary structures destroyed, 24 deaths and 739,597 acres

destroyed, mostly in San Diego and San Bernardino counties.

Underinsurance complaints make up about 47% of all

complaints filed.

Of the 316 underinsurance complaints, the Department has

been successful in getting reformation and payment over

policy limits on about 50 cases, with several other cases

still pending. In all of the 676 claims cases with

complaints, the Department has helped collect $10,483,356

on behalf of consumers.

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Insurance Scandal Touches S.C.

October 23, 2004

An unfolding scandal involving some of the biggest names in

the insurance industry has claimed one victim in South

Carolina, and there could be others.

A high-profile civil suit spearheaded by the New York

Attorney General's office against Marsh & McLennan, the

world's top insurance broker, prominently mentioned the

Greenville school system in outlining a host of

questionable and illicit industry practices.

Though only the school district was cited, the Port of

ton and presumably other big companies in the state

do business with Marsh.

Repeated references to the Greenville school system in the

31-page court document filed in New York on Oct. 14 alleged

that Marsh rigged the bidding process to tilt business

toward a favored client. As a broker, Marsh was supposed to

shop around and select the companies with the best rates to

insure the school district's $968 million building and

renovation project.

Instead, Marsh is accused of submitting a sham bid that was

artificially high to give the appearance of competition.

The court papers also say it tried to squeeze a " contingent

commission " agreement out of an insurance company in

exchange for steering business its way. Such shadowy

commission deals have been under investigation for a while,

but this case sheds some light on how the line of

legitimacy been crossed.

Since the 1970s, it has been common practice for insurance

companies to pay contingent commissions to brokers. These

are fees " contingent " on factors like profitability and

recurring business, and they are paid in addition to the

standard commissions based on a dollar percentage of

premiums.

Marsh, in Spitzer's view, took these commissions to a new,

and possibly illegal, level in the 1990s when it began

demanding insurers pay commissions to be considered for a

contract.

To many insurance companies and New York Attorney General

Elliot Spitzer, that sounded a lot like kickbacks. In 2003,

Marsh took in about $800 million in such fees, Spitzer's

suit said.

" In these arrangements there's a potential conflict of

interest for the broker to gravitate toward higher fees

instead of doing his or her best for the client, " said

Gannon, vice president of Weiss Ratings, an

independent research firm in Florida.

In the Greenville case, it's unclear whether the school

system was financially harmed, but there is potential that

it paid too much for its insurance.

The Port of ton, meanwhile, has been buying its

property and casualty insurance through Marsh for the past

five years, but officials there feel they have been getting

a fair shake.

" We have not been dissatisfied with our coverage or rates, "

said Byron , the port's spokesman. " We're always

looking for more insurance for less money. ... We

understand the nature of this market and are satisfied with

the service we get. "

South Carolina's attorney general's office and Department

of Insurance would say only that they were working in

tandem with their counterparts in other states to look into

the allegations. Neither would comment on whether other

South Carolina companies may have been victimized.