Why whine about Spitzer?

The Post-Enron corporate mistrust in the US is the climate in which Eliot Spitzer has brought his investigation into Marsh. But where there is a lack of detailed information, speculation incriminates everyone.

Perhaps, to use an ungainly analogy, this is the '9/11 mentality' - it has happened there so it is bound to happen here. But surely the vast majority of insurers and brokers in the UK have been limbering up for such a challenge through the painstaking process of preparing for regulation under the Financial Services Authority. And while further clarity from the regulator on what is included under inducements - i.e. are profit share and volume overriders included? - a body of opinion is growing to suggest that it is the abuse of such competitive incentives that is the real problem - not these age-old practices in themselves (see p5).

Could some comfort be taken in the UK's nationwide regulatory standards, as the US has a much more fragmented approach to regulation with standards differing from state to state?

While it is undoubtedly true that large premiums may attract greater temptations, this surely fixes the parameters of Spitzer's righteous spotlight on the top tier. What he believes to be an industry-wide, institutionalised problem may turn out not only to be localised to conglomerate organisations but to one particular family that runs three of the largest.

Another problem with trying to translate events in the US to the UK is that the market here is a more open and competitive one compared with the US, where major risks are dominated by just two brokers. It is within these particular market dynamics that the alleged bullying of insurers for upfront sweeteners has occurred.

Moderate scrutiny of Spitzer's personal/political agenda reveals other dynamics and drivers that are absent in the UK; it is in his interest to go about things in a noisy, publicity-seeking manner, as he obviously wants to be re-elected.

After the initial and inevitably frenzied reception the issue has received in the UK, many are giving way to scepticism about the transferability of Spitzer-type concerns to the market here.

However, despite all these differences, which show a direct translation of the issues to the UK is fraught, the FSA is now under pressure from insurers whose chief executives feel nervous about being accused of similar misconduct under the new regime from January. And, while the regulator declines to make clear exactly what it will be watching for, nerves and speculation will reign.