The Oregon Department of Consumer and Business Services (DCBS) has imposed a $5 million fine on nine insurers in the American International Group (AIG) for numerous violations of Oregon insurance
and workers’ compensation laws, some of them dating back to 1985.
According to DCBS, AIG must pay $1 million of the fine within 45 days. DCBS has suspended the remaining $4 million and will withdraw or impose it next year, depending on whether the companies meet certain conditions. AIG has agreed to the fine and the conditions.
DCBS cited the AIG companies for failing to comply with Oregon laws for processing claims of injured workers and reporting proof of insurance coverage. For example, the companies have failed to meet state standards in such areas as timely payment of medical benefits to injured workers and accurate reimbursements of costs for related services.
“We take these issues very seriously,” said DCBS Director Cory Streisinger. “Injured workers depend on their insurance carriers to pay claims accurately and on time, and our other major carriers succeed in doing so. AIG hasn’t lived up to the standards Oregon injured workers are entitled to expect, and it’s our job to hold them
DCBS also cited the AIG companies for using insurance policy forms that hadn’t been approved by the state. Advance approval of policyforms by DCBS is required to protect workers and ensure that policies comply with Oregon regulations.
In addition, DCBS found that the AIG companies failed to accurately report workers’ compensation premiums and claims data, which the department uses to develop the base rates employers pay to cover their workers. Premium information also is used to calculate each insurer’s assessments to fund parts of the state workers’ compensation system. AIG’s inaccurate reporting led to an underpayment of required assessments, and in addition to the fines imposed, AIG has paid DCBS approximately $3 million in previously unpaid assessments and interest.
The DCBS order gives the AIG companies 60 days to provide documentation showing whether additional assessments are due.
DCBS said the recent problems in Oregon came to light following an investigation of AIG’s financial statements by state and federal regulators in New York, where most of the companies are headquartered. Prior enforcement actions against AIG companies in Oregon include a suspension in 1989, followed by a settlement in 1991; an average of 36 civil penalties per year for claims and coverage compliance violations between 1990 and 2004; and an average of 68 civil penalties per year for claims and coverage compliance violations in 2005 and 2006.
The corrective actions include meeting state compliance standards for
claims processing and proof of coverage reporting, and not issuing or renewing any policies using unapproved policy forms. Streisinger will decide whether to withdraw or impose the suspended fine by Sept. 30,
According to DCBS, AIG has already demonstrated improvement in some of these areas, and DCBS will be closely monitoring their performance over the next year. AIG is the third-largest provider of workers’ compensation insurance in Oregon. Member companies covered by the Oregon settlement are AIU Insurance Co., American Home Assurance Co. AIG Casualty Co., Commerce and Industry Insurance Co., Granite State Insurance Co., Illinois National
Insurance Co., National Union Fire Insurance Co. of Pittsburgh PA, New Hampshire Insurance Co., and The Insurance Co. of the State of Pennsylvania.