Travelers has reached a $6 million settlement with 9 states and the District of Columbia over allegations it engaged in a kickback scheme involving contingent commissions with insurance broker Marsh.
In a Securities & Exchange Commission filing Monday, the St. Paul, Minn.-based insurer said it reached a settlement with the state attorneys general of Florida, Hawaii, Maryland, Michigan, Oregon, Texas, West Virginia, Massachusetts, Pennsylvania and the District of Columbia settling an investigation into steering allegations.
Travelers was one of several carriers accused of paying Marsh, a subsidiary of New York-based Marsh & McLennan Companies, kickbacks in the form of contingent commissions in exchange for certain executives steering business its way.
The practices came to light in 2004 during an investigation by then New York Attorney General Eliot Spitzer. That inquiry resulted in the world's four largest insurance brokers agreeing to give up contingents.
MMC, which paid more than $800 million to settle its case, is still struggling to return to profitability after the loss of the contingent commissions.
In the same filing, Travelers also revealed that it reached an agreement settling a class-action suit related to its dealings with brokers.
Both settlements are subject to court approval. According to a copy of the complaint posted on the Florida attorney general's Web site, the company neither admits nor denies any wrongdoing.
Travelers made no other comment.
Three state attorneys general revealed the settlement was for $6 million.
Massachusetts Attorney General Martha Coakley said the state would receive $1.3 million. Florida Attorney General Bill McCollum said the state would receive $1.1 million. Attorney General Hardy Myers in Oregon said the state would get $217,500.
"Florida's policyholders deserve nothing less than full disclosure in insurance transactions," said Florida Insurance Commissioner Kevin McCarty in a statement. "This settlement continues Florida's progress toward establishing a national standard for transparency in insurance transactions and reinforces our commitment to protecting Florida consumers."
"[This] settlement helps ensure that brokers truly represent their clients' interests by requiring greater transparency and disclosure of the types and ranges of compensation paid to insurance brokers on Travelers' policies," said Ms. Coakley.
"Policyholders have every right to expect fair and honest treatment from their insurers," said Mr. McCollum. "We will continue to aggressively demand accountability and transparency from the insurance industry in Florida."
As part of the settlement Travelers will be required to put in place a chief compliance officer, institute a training program and create a complaint hot line. The company will also have to provide a notice of disclosure on new and renewal policies and post that notice on its Web site after the settlement is finalized.
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