MIXED MOTIVES.(The Talk of the Town)

When Americans are asked to rank professions in terms of honesty and ethics, insurance agents routinely end up near the bottom of the list--somewhere between politicians and car salesmen. Generally, insurers are seen as clever hucksters who prey on insecurity and ignorance to sell people what they don't need at prices they shouldn't have to pay. So you might have thought that the industry's image couldn't get much worse. Then Eliot Spitzer, the New York State attorney general, filed a lawsuit against the giant insurance broker Marsh & McLennan, describing instances of bribery, price-fixing, and all-around corruption. The suit forced the resignation, last week, of Jeffrey Greenberg, Marsh's C.E.O., and, by implicating Marsh's collaborators and rivals, made the insurance game appear even seamier than before.

At the heart of this new scandal is the thoroughly unglamorous but very lucrative business of corporate insurance. As a broker, Marsh doesn't itself insure companies. Instead, it represents companies that are looking for insurance. Marsh is supposed to give its clients advice on the kind of coverage they need, and to solicit and sort through bids from different insurers. Companies use Marsh for the same reason that home sellers use real-estate agents: the agent's knowledge and experience is supposed to help the client get the right deal at the right price.

That's the idea, anyway. But, as Spitzer tells it, Marsh rigged the bidding process. It picked winners in advance, then got other insurers to offer artificially high bids that would make the winners' offers look reasonable. On one occasion, Marsh, unable to solicit fake bids, simply made them up. To foster the illusion of competition, the company staged "drive-bys," getting insurers to make presentations to a client, even when the outcome had already been determined.

While Marsh was doing this, it was also collecting huge sums of money from the insurance companies in the form of what were called contingent commissions--that is, kickbacks. Essentially, the more business Marsh generated for insurers, the more it got paid. And the insurers that paid higher commissions got more business. As one Marsh executive wrote in an e-mail, "We need to place our business in 2004 with those that have superior financials, broad coverage and pay us the most"--emphasis on "pay us the most." Another executive carefully distinguished between those "who [we] are steering business to" and those "who we are steering business from." One Marsh executive who was looking to steer business to a particular insurer actually wrote, in an e-mail, "hint hint." Though some insurance companies grumbled, others seem to have been happy to go along; ...