AG Watch

Today, Diane Levick of the Hartford Courant gives us a heads-up on what might be the next big AG SuperLawsuit Sweep. St. Paul Travelers, a Minnesota-based insurer, seems about to join the Hartford Financial Services Group as targets of Connecticut Attorney General Richard Blumenthal’s cleansing of insurance call center identification practices. According to the article, several state attorneys general have had their litigulatory hackles raised because “some insurers’ service centers did not identify their company name when fielding customer calls at the request of independent agents.”

While Mr. Blumenthal may have discovered a potential principal-agent problem, Ms. Levick notes, “It’s unclear how deeply or often consumers were harmed by not realizing they were talking directly to insurers, and how far back the problem started.” Indeed, Ms. Levick reveals that Mr. Blumenthal “wouldn’t provide specific examples of consumers being hurt, or comment on whether service centers tried to discourage consumers from filing claims when they called for advice.”

General Blumenthal claims, “The brokers certainly did not do their job, and the harm was higher premiums.” Elsewhere in the article, however, it becomes clear that agents joined this call center arrangement in order to reduce their costs. Is it Mr. Blumenthal’s claim that none of those lower costs made it to consumers? This is surely a difficult econometrics problem, but without any sort of actual economic analysis, Mr. Blumenthal’s allegations remain empty .

The absence of proof of real harm is not the only suspect piece of Blumenthal’s puzzle—vaguery edifies vaguery in his legal model: “Shifting customers to the service centers is not illegal, but deception is.” Deception, AG Watch agrees, is a nasty business, but “deception” implies an intent to harm, which these crimes manque may lack. Levick describes the matter as “one more example of how investigators have raised alarm over behavior the industry considered acceptable.” These companies were simply doing what they had been doing, and no one had balked before. Of course, attitudes toward certain behaviors may change over time, but that cannot make those behaviors illegal ex post facto.

Consider as well that the appearance of jurisdiction in these cases is at least as misleading as the call service itself. Both Hartford Financial Services and St. Paul Travelers have strong operational ties to Connecticut (Hartford, of course, headquarters there), but the real crime here—if any crime actually occurs—is committed by Connecticut agents against Connecticut consumers; the seemingly independent agents, after all, are the ones who are redirecting their phones. But if the Blumenthal went after the Connecticut-based agents involved, he would not reap deep-pocket profits. And those profits, after all, are the object of this pursuit.

Such a legally and economically flimsy strategy shouldn’t provide Connecticut with a blank settlement check, nor should it allow Connecticut’s AG to design every detail of nationwide insurance practices.