NU Online News Service, Oct. 19, 2004/By Jim Connolly and Arthur D. Postal
Life and health insurers continue to be drawn into the investigation launched by New York Attorney General Eliot Spitzer into the practices of insurance brokers.[@@]
The Attorney General’s office is investigating the practice of how brokers award clients’ contracts to insurance companies and whether bids are legitimate and if they are, whether they are being adequately considered.
Life insurers who participate in the group market and health insurers are also being scrutinized, along with insurers such as American International Group, New York and ACE, Ltd., Hamilton, Bermuda, who provide commercial insurance. Brokerage firms, including Marsh & McLennan, New York, and AON, Chicago, are also part of the investigation.
At press time, the price of stocks in the insurance sector continued to be heavily hit by investors concerned with the long-term implications of the investigation. Between October 13 and Oct. 18, the Bear Stearns & Co. Life Index fell 5.3%.
On Oct. 19, companies including MetLife, Inc., New York; and UnumProvident Corporation, Chattanooga, Tenn., said that they have received requests for information from the Attorney General’s office.
MetLife says that given its size and position in the group marketplace, it is among a number of companies receiving inquiries from the Attorney General’s office. It says that it conducts business directly and through brokers and consultants, and pays both commissions and other contingent payments. Contingent payments totaled approximately $25 million in 2003. Additionally, Met Life says, third parties also may be compensated for administrative services that they perform.
The company says that it advised Spitzer’s office on Oct. 1, 2004 that MetLife was not aware of any instance in which it or any other company had provided a “fictitious” quote.
UnumProvident President and CEO, Tom Watjen, stated that “In addition to full disclosure, we will further review our compensation policies and procedures to be sure that we appropriately compensate our brokers but do not create any actual or perceived conflict between the broker and the customer.”
As the review at UnumProvident continues, Watjen said, it will not enter into any new compensation agreements until it is completed.