Massachusetts Insurance Commissioner Joseph Murphy announced Thursday that the state received more than $3.44 million as its share of a 50-state settlement with the American Insurance Group.
Commissioner Murphy stated that AIG has admitted it had underreported workers’ comp premiums, and thus underpaid premium taxes and assessments, over several years.
Massachusetts’ insurance division was one of eight states which led the investigation into AIG’s practices. All 50 states and the District of Columbia will benefit from the regulatory settlement agreement with the insurer.
“The settlement with AIG is an outstanding example of interstate cooperation in the insurance arena,” said Commissioner Murphy. “While Massachusetts and a few others took the lead in challenging AIG’s practices, every state will benefit financially, and the collective voice of insurance regulators across the country has sent a powerful message to the industry that we share the capability and the will to investigate and resolve even the most complex issues in the insurance market.”
Under the settlement, AIG has agreed that its previous financial reports were inaccurate with regard to its workers’ comp insurance line, underreporting workers’ comp premium dollars by approximately $2.1 billion nationwide. In rectifying those reports, AIG has paid both a $100 million penalty and more than $46.5 million in additional premium taxes and assessments to the states.
Regulators said Massachusetts’ share of $3.44 million represents one of the largest workers’ comp premium settlements with the state’s insurance division. The settlement money will be placed in the state’s general fund. The last large settlement was in 2009 when Health Markets paid $2 million. Last year, the state’s insurance department collected about $600,000 in settlements. In 2010, about $200,000 was collected.
The AIG agreement also authorizes Massachusetts and its fellow lead states to monitor AIG’s operations for the next two years and then conduct an extensive follow-up examination to confirm that AIG is operating under the new rules it has accepted.
“The multi-state re-examination will offer a final confirmation that AIG remains committed to a culture of regulatory compliance,” said Barbara Anthony, undersecretary at the state office of consumer affairs and business regulation, which oversees the insurance division. “The outcome of the AIG investigation underscores the enormous value of our collaboration with regulators across the U.S.”