An insurance industry consulting firm has agreed to pay $2 million in restitution after taking payments from MetLife Inc., Prudential Financial Inc. and UnumProvident Corp. to steer customers to those companies, New York officials said.
San Diego-based Universal Life Resources Inc. and its chief executive, Douglas Cox, were also accused of charging secret fees for “communications services,” including printing informational materials, far above the going rate.
The agreement resolves a complaint filed by New York Attorney General Eliot Spitzer’s office and a citation filed by the state Insurance Department in November 2004. Spitzer’s original lawsuit said Universal Life collected more than $11.5 million last year in hidden payments.
Under the agreement, Universal Life, which has brokered employee benefit plans and insurance coverage on behalf of companies such as Safeway Inc., Intel Corp., Northrop Grumman Corp. and others, will adopt new fees and business practices to avoid conflicts of interest, Spitzer said.
Spitzer has alleged that bid-rigging by insurance companies — along with special commissions aimed at steering customers to insurers in exchange for bonuses — is widespread. That can keep customers from receiving the best deal.
“The agreement with ULR represents another milestone toward curtailing undisclosed contingent commissions in the insurance industry,” he said. “Consumers of insurance products benefit when these conflicts are exposed and eliminated.”
Universal Life also agreed to allow a monitor of its insurance business practices for five years.
Cox and Universal Life admitted no wrongdoing in the settlement.
Brian Maddox, a spokesman for Cox, who now runs a small consulting firm in San Diego, declined to comment.
In the biggest settlement of Spitzer’s insurance probes, Marsh & McLennan Companies Inc., the world’s largest insurance brokerage, in January agreed to pay $850 million in restitution to end an investigation into bid rigging and price fixing. The settlement became a model for other insurance company settlements.
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