Michigan joined with over 30 state insurance regulators, working collaboratively through the National Association of Insurance Commissioners (NAIC), and announced a multi-state regulatory settlement with the nation’s largest insurance broker, Marsh & McLennan Cos. Inc. (Marsh).
The settlement agreement is designed to see that extensive compensation and disclosure reforms are implemented by Marsh. It adopts Marsh’s agreement made in January 2005 to pay its clients $850 million in restitution to resolve allegations of fraud and anti-competitive practices. $34,529,569 of the settlement dollars will be targeted towards Michigan commercial clients.
“Bid rigging and steering of clients without notification will not be tolerated,” said OFIS Commissioner Linda A. Watters. “I am happy to sign on to this agreement and provide restitution for Michigan clients of Marsh & McLennan.”
The investigation into broker bid-rigging was led by New York Attorney General Eliot Spitzer and New York State Insurance Superintendent Howard Mills. Marsh agreed with these officials to make restitution.
Entering into this Settlement Agreement makes the New York Agreement subject to enforcement by the Michigan Commissioner of Financial and Insurance Services (OFIS). Since the agreement contains a cease and desist order, Marsh would be subject to separate penalties here if it fails to adhere to the order. Michigan purchasers of insurance through Marsh will be compensated and Marsh has undertaken a reformation of its business to prevent the illegal practices from reoccurring.
“Insurance consumers benefit from fairer treatment and greater disclosure,” Watters said. “I will continue to vigorously protect insurance consumers in Michigan and support investigations and settlements that ensure that the commercial brokerage industry is held to a high ethical standard.”
The business reforms Marsh adopted include limiting its brokerage compensation to a single fee or commission at the time of placement, banning contingent commissions, and requiring disclosure of all forms of compensation to the clients. Michigan and other participating regulators will receive ongoing compliance reports from Marsh, have the authority to enforce reforms, and retain the ability to continue ongoing investigations with Marsh’s cooperation.
Marsh clients had until Tuesday, Sept. 27 to join the settlement pool and release Marsh from further claims. The settlement announcement was withheld until the deadline had passed to avoid the appearance of weighing in on whether eligible clients should opt-in.
“It was important to return as much money to as many commercial clients as possible, which was a key factor in my support of the settlement,” Watters said. “Marsh customers, though, are still free to not opt into the monetary settlement and take action on their own.”
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