(by Arthur Headner)

Amid the New York Attorney General Eliot Spitzer’s probe over the activity of some insurers, more and more officials become sceptical about the efficiency of work for the insurance regulators.

``If the state regulators don’t do their job, that adds to the debate of perhaps moving insurance regulation in a different direction. A good question is: Where were the regulators?’’ said a Republican for Alabama Richard Shelby.

Earlier this month, the New York Attorney General Eliot Spitzer opened a probe against insurance broker Marsh & McLennan Cos. for rigging bids and inflating client costs. "It is scaring to death anyone invested in the sector. 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," said Tim Ghriskey, chief investment officer of Solaris Asset Management, about the investigation.

Amid his investigation, the world’s top insurance group Marsh & McLennan said the contingent commissions were 7% from 2003 total revenue, or $845 million. Marsh & McLennan also said it got as much as $1.2 billion in incentive payments within the past 18 months. Cut of the fees will definitely lead to decreased operating income.

The probe later also included American International Group Inc., the world’s No.1 insurance company, some health insurers such as MetLife Inc. Municipalities, including Greenville County of South Carolina, and others.

The investigation’s scale is now turning to the nation-wide scandal and can lead to huge changes in the regulatory policy as for the insurance companies.