$1.3M For Mass In AIG Bid-Rigging Settlement
9 states, D.C., share $12.5 million
Massachusetts will receive $1.3 million as part of a settlement with the American International Group Inc. (AIG) related to that company’s role in an insurance bid-rigging and price-fixing scheme devised by one of its subsidiaries.
The subsidiary, insurance broker Marsh & McLennan, has several offices in Massachusetts.
The settlement requires AIG to pay $12.5 million to Florida, Hawaii, Maryland, Michigan, Oregon, Texas, West Virginia, Pennsylvania and Washington, D.C., in addition to Massachusetts. Attorney General Martha Coakley’s Insurance and Financial Services Division handled the case for Massachusetts.
Winners And Losers
According to Coakley, AIG and Marsh & McLennan’s bid-rigging scheme allowed Marsh to predetermine which insurance companies would “win” a particular account. To create the appearance of propriety, Marsh would tell certain insurers to submit intentionally inflated bids.
The falsely inflated bids gave commercial policy-holders the impression that they were receiving the most competitive bids, but those policy holders were actually being overcharged.
Coakley also said AIG, which is based in New York, was involved in a “pay-to-play” arrangement for broker commissions. Through incentive-based “contingent commissions,” which are also known as profit sharing commissions and are undisclosed to consumers, brokers were encouraged to steer business to the insurer that would offer the most lucrative contingent commission.
According to Coakley those policies were often not in the client’s best interest.
Commercial policy-holders affected by the bid-rigging and contingent commissions schemes included large and small companies, nonprofit organizations and public entities.
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