A large insurance broker has negotiated a settlement that should resolve an investigation initiated by New York Attorney General Eliot Spitzer.[@@]
The broker, Marsh & McLennan Companies Inc., New York, says it will be establishing an $850 million fund to compensate some U.S. policyholder clients affected by what Spitzer has identified as problems with brokerage practices.
Spitzer’s office filed a complaint against Marsh in October 2004, and New York insurance regulators filed citations against Marsh that month. The complaint and citations allege that Marsh steered clients to insurers with which it had hidden compensation agreements and that the firm solicited rigged bids for insurance contracts.
Together with the announcement of the settlement agreement, Marsh has released a report on an investigation it hired outside lawyers to conduct of its own operations. Although the lawyers who wrote the report say the investigation included the Marsh benefits and human resources consulting units, the lawyers focus mainly on evidence of bid-rigging and other problems at the company’s property-casualty brokerage units.
Marsh clients eligible to receive compensation include those who used Marsh to buy insurance coverage between Jan. 1, 2001, and Dec. 31, 2004, if those purchases involved Marsh collecting contingent commissions or overrides during that same 3-year period. “These clients will be eligible to receive a payment without having to prove fault, harm, or wrongdoing,” Marsh says in a statement about the settlement.
The settlement calls for Marsh to put cash in the compensation fund in 4 annual installments that will start this June and continue until June 2008.
Marsh emphasizes in its statement about the settlement that it is neither admitting or denying Spitzer’s allegations about its brokerage operations, and it says it has cooperated and will continue to cooperate with Spitzer’s “ongoing investigation of the insurance industry and individuals.”
“No portion of this fund represents a fine or penalty,” Marsh says in a statement about the settlement.
In addition to setting up a client compensation fund, Marsh has adopted a number of changes to its operations and its management practices.