MetLife Inc., the largest group life insurer in the nation, will pay $19 million and change some of its business practices to end an investigation of payments made to brokers to steer clients its way, Attorney General Eliot Spitzer said Friday.
The settlement came as part of a multiyear investigation of bid rigging and price fixing in the insurance industry. Spitzer has argued that “contingent commissions” paid to brokers and agents to steer business to insurance companies are the equivalent of kickbacks that unfairly increase the prices paid by insurance clients.
New York-based MetLife will ban contingent commissions and disclose broker payments as part of the settlement. The company will pay $16.5 million in restitution to policyholders and penalties of $2.5 million.
MetLife instructed its sales personnel to “leverage” commission agreements by telling brokers how close they were to meeting certain targets for business provided to MetLife. If met, the targets would guarantee the brokers additional money, Spitzer’s office said.
MetLife also arranged lucrative compensation agreements with certain brokers who directed major insurance contracts to MetLife, according to the settlement.
The company, which has more than 70 million customers worldwide, is not admitting to any liability in the settlement. Spokesman John Calagna said MetLife cooperated with Spitzer’s investigation and has already changed some of its business practices.
“MetLife believes that resolving this matter is in the best interests of its shareholders, customers and policyholders,” Calagna said a statement.
Spitzer’s probe of the industry began in 2004 and more than 20 insurance companies have agreed to pay more than $3 billion so far.
Earlier this month, Prudential Insurance Co. agreed to pay $19 million in restitution and penalties to settle a similar investigation. Last month, UnumProvident Corp. in Chattanooga, Tenn., agreed to pay $15.5 million in restitution and penalties.
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