New Auto Insurance Companies included in investigation

On Friday, California's attorney general announced that he is joining other states' top prosecutors in a formal investigation into alleged antitrust violations, price fixing and fraud by insurance companies and brokers.

The probe has rocked the insurance industry from the United States to Europe.

A story on the Associated Press wire reports that Attorney General Bill Lockyer of California said the investigators will first examine possible bid-rigging and other anti competitive behavior.

His announcement comes on the heels of an investigation launched earlier in October by Spitzer into the practices of Marsh & McLennan which has since broadened to include other states and other insurance companies.

Spitzer accuses Marsh & McLennan of rigging bids and using incentive fees to manipulate the sales of property and casualty policies for corporations, driving up businesses' insurance costs.

In California, Lockyer is looking into allegations that companies failed to adequately disclose that they were paying incentives to brokers and that they placed phony bids so businesses would think they were paying a reasonable price.

Meanwhile California's insurance commissioner, John Garamendi, has been investigating brokers' contingency payments and said his investigators will work with insurance regulators on those allegations.

Garamendi and other regulators and prosecutors are beginning to examine personal insurance such as auto, life and homeowners' policies.

"I think the insurance industry is about to receive the kind of scrutiny they have not received in 40 years," said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights. "I think the tip of the iceberg hasn't even been discovered yet."

According to the AP release, Rosenfield's organization filed suit Friday against Firemen's Fund Insurance Co., alleging it gives its agents incentives to discourage them from giving good drivers a 20 percent discount. Rosenfield said that would be a violation of California's Proposition 103, 1988 insurance reform legislation written by Rosenfield.