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News October 18, 2004 Issue

Dear Insurance Industry: We Feel Your Pain

Last year, New York attorney general Eliot Spitzer famously boasted that he simply "tapped on the glass" of the mutual fund industry, and it "shattered."

Last week, he tapped on the insurance industry’s glass.

In an October 14 press conference, Spitzer announced that his office had filed a suit against insurer Marsh & McLennan for allegedly steering clients to insurance providers based on hidden payments Marsh would receive, despite Marsh’s stated intention to act in its clients’ best interests.

The press conference was pure Spitzer, replete with "exciting" (Spitzer’s word) exhibits and seemingly incriminating internal e-mails. A live CNBC broadcast of the conference periodically cut away to show the stock price of Marsh and other "Spitzer Targets" dropping.

Of course, whether the insurance industry "shatters" or not remains to be seen. But Spitzer clearly thinks he’s hooked a live one. "The insurance industry needs to take a long, hard look at itself," said Spitzer in the press release announcing his complaint. "If the practices identified in our suit are as widespread as they appear to be, then the industry’s fundamental business model needs major corrective action and reform." Added Spitzer: "There is simply no responsible argument for a system that rigs bids, stifles competition and cheats customers."

So: Does that mean he’s done with us?