Attorney General Lisa Madigan, New York Attorney General Eliot Spitzer and Connecticut Attorney General Richard Blumenthal announced an $80 million settlement agreement with Bermuda-based holding company ACE Limited, and its U.S.-based insurance subsidiaries. The charges against the insurance giant were that it engaged in bid-rigging, steering of insurance business and accounting misconduct.
The agreement requires ACE to pay back $40 million to policyholders, including Illinois policyholders, who were the victims of ACE’s scheme to rig bids on excess casualty insurance policies. The amount that Illinois policyholders will receive has not yet been determined. The company did not disclose to its policyholders that it was colluding with other insurers and brokers to rig bids for excess casualty insurance. Under the agreement, ACE also will pay $40 million in penalties and payments to the three states, including $8 million to Illinois.
Additionally, the agreement requires ACE to reform critical business practices. Under the agreement, ACE is required to sharply curtail its use of “contingent commissions,” paying no contingent commissions on excess casualty insurance placements through 2008.
ACE also has agreed to support legislation banning contingent commissions and requiring greater disclosure of compensation to brokers and agents. Under the agreement, ACE has agreed to provide new disclosures about ranges of compensation paid to brokers and agents by insurance products on a special Web site later this year.
The Division of Insurance within the Illinois Department of Financial and Professional Regulation, along with the New York Insurance Department and the Connecticut Insurance Department, will monitor ACE’s compliance with these new business reforms.
“Our investigation revealed that ACE secretly agreed with insurance brokers and other insurers to rig bids for insurance policies. Because of this illegal conduct, policyholders did not get the impartial recommendations they deserved to get and they ended up paying more for their insurance,” Madigan said. “ACE also paid contingent commissions to brokers in exchange for the brokers steering business to ACE, again without the policyholders’ knowledge or consent.”
Madigan’s investigation was conducted in cooperation with the IDFPR’s investigation of ACE’s conduct. IDFPR has primary responsibility under Illinois law for regulating the industry.
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