The Chubb Corporation has entered into a settlement agreement with the Attorneys General of New York, Connecticut and Illinois, to resolve an investigation of customer steering, improper finite reinsurance transactions, and other unlawful industry practices. Under terms of the settlement, Chubb agreed to discontinue paying contingent commissions on all insurance lines in the United States beginning in 2007. The company also agreed to contribute $15 million to a settlement fund as well as an additional $2 million to help defray the costs of the investigation by the Attorneys General.
Chubb was not assessed any fine or penalty in connection with this settlement, but acknowledged that it appears to have unknowingly benefited from the bid-rigging activities of others in the excess casualty market, which may have provided the company with an advantage in retaining certain renewal business.
Chubb announced it will replace contingent commissions with a supplemental compensation program that will reward Chubb’s agents and brokers for superior performance in a manner consistent with evolving marketplace standards and reforms urged by the Attorneys General.
Chubb says the company cooperated fully in the investigations, which have been led by the New York Attorney General’s Office. The investigations — which were augmented by an independent inquiry commissioned by Chubb — did not conclude that Chubb participated in a pattern or practice of illegal bid-rigging in the excess casualty insurance market. A summary of the final report of that independent inquiry, conducted by Stier Anderson LLC, is available on Chubb’s website at www.chubb.com.
“We are pleased that Chubb has resolved these investigations on a basis which recognizes that our company did not knowingly participate in bid-rigging,” said John D. Finnegan, chairman and CEO of Chubb. “The Attorneys General are to be commended for raising important questions regarding a number of insurance industry practices. Chubb has voluntarily undertaken substantial business reforms over the past two years, culminating with today’s announcement of a new producer compensation model that recognizes the important services provided by independent agents and brokers. Chubb is proud to take the lead in instituting reforms that will benefit our producers and our insureds.
“Over the last 124 years,” said Finnegan, “Chubb has earned a unique reputation for integrity and fairness in paying policyholder claims, and we are committed to maintaining the highest ethical standards in all aspects of our business.”
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