Former SEC Chairman Arthur Levitt told the Evening Standard that the "insurance scandal is really far more pernicious than almost any other scandal of this decade."

Levitt was referring to the investigation by New York Attorney General Eliot Spitzer and at least three other states into contingent commissions or placement service agreements.

These are hidden fees that some insurers pay brokers for their business, essentially rigging market prices and bids instead of allowing brokers to find the lowest-cost insurance for their customers, primarily for group policies.

Levitt said the insurance scandal could affect the average individual far more greatly than the mutual fund scandal. So far, Spitzer has only sued Marsh & McLennan, but evidence in his case also implicates ACE, AIG, The Hartford and Munich American Risk Partners. As a result, share prices of a number of leading insurance giants have plummeted in recent days. Meanwhile, Marsh, AIG and London broker Willis have since announced they have suspended contingent commissions.

And Spitzer is not only extending his investigation beyond property and casualty insurance to health and life insurance, but he is also probing consulting companies that advise firms on insurance and benefits plans, according to Reuters. Mercer, a subsidiary of Marsh & McLennan, is one such human resources consulting company that Spitzer is examining.

"We are looking at Marsh & McLennan very broadly in its connection to the insurance industry," an investigator speaking on condition of anonymity told Reuters. "We understand Mercer does a fair amount of insurance consulting and employee-benefits consulting, and we’re looking at those areas, as well.

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