Spitzer shaker for US health insurers

AMERICAN health insurers have been dragged into the scandal affecting broker Marsh & McLennan, causing panic among investors.

Stocks in the sector took a pounding after it was revealed that New York Attorney General Eliot Spitzer is examining life and medical insurers as well as property and casualty insurers and brokers.

'It is scaring to death anyone invested in the sector,' said Tim Ghriskey, chief investment officer of Solaris Asset Management. 'It intimates that brokerage fees could potentially become transparent to consumers, and that will increase competition. As a result, brokerage-fees might decrease. Consumers will benefit, but it will squeeze the companies.'

At least three states, California, Connecticut and Pennsylvania, are studying Spitzer's lawsuit last week against New York insurance broker Marsh & McLennan for allegedly rigging bids and inflating client costs.

Spitzer's probe centres on the 'contingent commissions' that insurers offer brokers in exchange for steering insurance business their way.