Bermuda-based ACE and its insurance subsidiaries have settled multistate bid-rigging accusations by agreeing to pay $4.5 million, it was announced.
Oregon Attorney General Hardy Myers on Thursday put out a statement concerning the agreement to settle state antitrust claims that involved improper, fictitious quoting and steering of insurance businesses.
The stipulated general judgment filed in Marion County Circuit Court names ACE Group Holdings Inc. and its subsidiaries.
The companies agreed to pay $4.5 million to Oregon, Texas, Florida, Massachusetts, Hawaii, Michigan, West Virginia and the District of Columbia in settlement of their antitrust claims. The agreement admits no violations of law.
Oregon, as a member of the multistate task force, will receive $189,475 as part of the settlement.
The agreement also mandates comprehensive injunctive relief including the disclosure of compensation ACE pays to insurance brokers.
Mr. Myers said the multistate investigation revealed that the company participated in fictitious quoting and steering of business and other schemes in the commercial insurance market, orchestrated by Marsh & McLennan of New York.
In the process, large and small companies, nonprofit organizations, and public entities that purchased commercial lines of insurance from ACE were often misled into believing they were receiving the most competitive commercial premiums available, the attorney general stated.
"This is the second settlement that Oregon has entered into with an insurance carrier involving charges of bid-rigging," Mr. Myers explained. "We will continue to monitor other carriers for this anticompetitive way of operating in the marketplace and will take appropriate actions against them in Oregon's courts."
Mr. Myers said the scheme devised by broker Marsh & McLennan gave commercial policyholders the illusion of a legitimate competitive bidding process on policies.
However, Marsh had secretly predesignated certain insurers to win bids, but the results for the policyholders were actually inflated rates, not competitive bids. The scheme was successful because insurers such as ACE earned their preferred status by paying "contingency commissions" to insurance brokers but failed to disclose those payments to policyholders, according to the attorney general.
Prior to the settlement, ACE paid out compensation for overcharges to a nationwide group of policyholders and adopted significant business reforms that govern its bidding and underwriting practices.
ACE will be required to abide by those reforms and, in addition, disclose the actual amount of payments made to insurance brokers upon request from its customers and prospective policyholders. ACE has cooperated with the multistate task force and agreed to provide assistance to the states as they continue their investigation.
In addition to ACE, the revelation of the Marsh scheme, which was uncovered by the New York Attorney General's Office, has led to large cash settlements by other major insurers and brokers and agreements to end contingent commissions.
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