Spitzer Probe Expands To Life Insurers
Life and health insurers are being pulled into the mushrooming investigation first launched by New York Attorney General Eliot Spitzer into the practices of commercial insurance brokers and insurers.
The attorney generals office is investigating the practice of how brokers award clients contracts to insurance companies and whether bid rigging is practiced by brokers and insurers.
That investigation is spreading to include inquiries from other attorneys general, including Connecticuts Richard Blumenthal. State insurance regulators also are starting collaborative investigations.
Life and health insurers that participate in the group benefits market are facing the same scrutiny as companies that are a core part of the original Spitzer investigation, which include American International Group, New York, and Ace Limited, Hamilton, Bermuda, who provide commercial insurance, and brokerage firms Marsh & McLennan, New York, and AON, Chicago.
Spitzers investigation into insurance brokerage practices culminated with a civil suit against Marsh & McLennan on Oct. 14. The civil complaint also names insurers including ACE, AIG, The Hartford and Munich American Risk Partners, a unit of Munich Re in Princeton, N.J.
Connecticut AG Blumenthal is requesting information from 20 insurers in connection with an investigation of price fixing and bid rigging in the insurance brokerage market. Letters of inquiry were issued in July and subpoenas were issued in the last few days to property-casualty, health, auto and employee benefits insurers, Blumenthal said in an interview with National Underwriter.
Blumenthal said the investigation is “active and ongoing.” He declined comment on potential action until the investigation is concluded. There may well be coordination of work with other attorneys general, he added.
On Oct. 19, MetLife, Inc., New York, and UnumProvident Corporation, Chattanooga, Tenn., said they received requests for information from Spitzers office.
MetLife said that given its size and position in the group marketplace, it is among a number of companies receiving inquiries from Spitzers office. MetLife said 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 on $9 billion in premiums and fees, MetLife said. Additionally, MetLife said, third parties also may be compensated for administrative services they perform.
The company said it advised Spitzers 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, “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.
In addition to MetLife and UnumProvident, CIGNA, Philadelphia, and Aetna Inc., Hartford, Conn., have stated previously in filings with the Securities and Exchange Commission that they have received requests from Spitzers office for information.