SINK, McCOLLUM AND McCARTY ANNOUNCE
$12.5 MILLION AIG INSURANCE SETTLEMENT
Chief Financial Officer Alex Sink, Attorney General Bill
and Insurance Commissioner Kevin McCarty
today announced that Florida has reached a settlement with a large insurance
carrier involved in a “pay-to-play” tactic used by Marsh & McLennan and
other insurance brokers. American International Group Inc. (AIG) will pay
$12.5 million to Florida and eight other states as well as the District of
Columbia to resolve allegations that some of its insurance subsidiaries
engaged in bid-rigging and price-fixing in the commercial insurance market.
These actions purportedly caused Florida public entities and private
organizations to pay higher premiums.
“It’s wrong that governments and businesses paid inflated
insurance rates because they were led to believe there was competition when
there wasn’t,” said CFO Sink, who oversees the Department of Financial
Services which served a lead role in the multi-state investigation along
with the Attorney General’s Office and the Office of Insurance Regulation.
“I applaud today’s settlement, because policyholders deserve to know exactly
what they are paying for and that they are paying a fair price for it.”
“We will continue to hold insurance companies accountable for the manner in
which they treat their customers,” said Attorney General McCollum. “I am
pleased that we have been able to reach resolution for the affected
policyholders in this set of circumstances, and I look forward to continuing
this accountability for our state in the insurance industry.”
AIG and several of its insurance subsidiaries allegedly conspired with Marsh
and other brokers by submitting fake bids to create the illusion of a
competitive bidding process in the excess casualty commercial insurance
market. Investigators determined that despite the appearance of a fair
bidding process, the broker had already decided which insurer would receive
a particular policyholder’s business. As part of the scheme, AIG paid the
brokers “contingent commissions” which were not disclosed to policyholders
and in return received other lucrative business.
The Florida Attorney General’s Office, Department of Financial Services and
Office of Insurance Regulation will receive approximately $3 million of the
settlement which will fund a reimbursement pool for affected policyholders.
The settlement funds will also repay the state agencies’ investigative
"Full disclosure in all insurance transactions is a must, and Florida
consumers deserve nothing less," said Florida Insurance Commissioner Kevin
McCarty. "My office is committed to protecting Floridians, and this
settlement further demonstrates the progress Florida is making toward
establishing a national standard for transparency in insurance
AIG has agreed to a consent decree and final judgment pending approval in
Leon County Circuit Court which will provide comprehensive injunctive
relief, including enhanced disclosure to consumers of the compensation AIG
pays to insurance brokers. AIG will also be required to abide by those
reforms and to fully disclose the nature and range of payments made to
insurance brokers on specific lines of coverage in the prior year. Prior to
the settlement, AIG provided reimbursement to a nationwide group of
policyholders and adopted significant business reforms that govern its
bidding and underwriting practices.
This settlement marks the fourth agreement Florida has reached with
insurance carriers that were involved with Marsh’s “pay-to-play” tactics.
AIG has cooperated with the multi-state task force and will provide
assistance to the states as they continue their investigation of insurance
brokers and other insurers.
In addition to Florida and the District of Columbia, the following states
participated in the investigation and settlement: Hawaii, Maryland,
Massachusetts, Michigan, Oregon, Pennsylvania, Texas and West Virginia.
A copy of the complaint is available online at: http://myfloridalegal.com/webfiles.nsf/WF/KGRG-7BBNM2/$file/AIG-Complaint.pdf
A copy of the consent decree and final judgment is available online at: