West Virginia Attorney General Darrell McGraw has sued insurance broker Acordia, charging the intermediary received millions of dollars in "hidden" contingent commissions in return for steering business to certain carriers.
The suit against Chicago-based Acordia, and Acordia of West Virginia Inc., claims that the payments "were unfair and deceptive, and resulted in less competition for insurance," the attorney general's office said in a statement.
"Secret contingent commissions skew the marketplace and may cause us to pay more for our insurance premiums," said Mr. McGraw. "The world's largest insurance brokers have already sworn off secret payments. I expect Acordia to be next."
In its complaint, Mr. McGraw said Acordia disclosed some but not all of the payments it received from insurers. He said insurance placements were made "regardless of whether the insurers provided the best cost, coverage and financial security for the client." Instead, the placements decisions were made according to which insurance company paid "the most money in contingent commissions, profit sharing and kickbacks," he alleged.
The contingents, which go back to 1999, were paid based on a national program, sometimes called "Millennium Agreements," and were in addition to local agreements. He alleged that the cost of the commissions was passed on to the policyholders through higher premiums.
The commissions touch all lines of business, both personal and commercial, and affect private and public entities, including West Virginia state programs, he said.
Among the insurers identified as being a part of the program are Chubb, The Hartford, St. Paul Travelers "and others."
Douglas L. Davis, assistant attorney general in West Virginia, responding by e-mail, said the evidence supporting West Virginia's suit is similar to evidence collected in other suits and settlements, which consisted of e-mails and internal memos. He said the attorney general is open to out-of-court settlements, but he could not comment on whether there is any ongoing negotiation with Acordia.
The state's department of insurance is not a plaintiff in the suit, he said.
Small portions of the suit, pertaining to the exact amounts of payments and what appears, in some cases, to be the names of carriers the agreements were with, are blacked out. Mr. Davis said this was done because Acordia obtained a protective order during the investigation claiming the information to be confidential.
In the complaint, West Virginia is seeking to have Acordia discontinue the abuse it alleges, pay damages and restitution to policyholders, pay penalties, disgorge itself of contingent commissions it received, and pay the costs for investigations and prosecution.
A spokesperson for Acordia said the firm's policy is not to comment on ongoing litigation. She added that the firm does not condone any unethical behavior in any of its business dealings.
Acordia is a subsidiary of San Francisco-based financial services company Wells Fargo Company.
On its Web site, Acordia has posted a list of core values and terms of disclosure. The broker said it is committed to full disclosure of all fees and commissions, and will calculate for its customer what, if any, contingent commissions it expects to receive on a placement.
"The world's largest insurance brokers have already sworn off secret payments. I expect Acordia to be next."
West Virginia Attorney General Darrell McGraw
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