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Press Release

McCollum, Sink And McCarty Announce $12.5 Million AIG Insurance Settlement
Tuesday, January 29, 2008
Contact Info:

Ed Domansky 
850-413-2515                                                  
Edward.Domansky@floir.com

Joint News Release from the Florida Attorney General’s Office
 
TALLAHASSEE, Fla. - Attorney General Bill McCollum, Chief Financial Officer Alex Sink 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.
 
"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 costs.
 
"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."
 
"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 transactions."
 
AIG has agreed to a consent decree and final judgment 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 AIG's Consent Decree and Final Judgment is available online at: http://myfloridalegal.com/webfiles.nsf/WF/KGRG-7BBNLL/$file/AIG-Consent-Decree.pdf.
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Contact Info:

Ed Domansky 
850-413-2515                                                  
Edward.Domansky@floir.com

About the Florida Office of Insurance Regulation
The Florida Office of Insurance Regulation (Office) has primary responsibility for regulation, compliance and enforcement of statutes related to the business of insurance and the monitoring of industry markets. For more information about the Office, please visit www.floir.com or follow us on Twitter @FLOIR_comm.

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