American International Group Inc. will pay California $15.6 million in penalties to settle allegations that its insurance companies underreported workers’ compensation premiums over several decades.
The sum is part of a $146.5 million settlement AIG reached with insurance regulators across the country in 2010 that was finalized and became effective on May 29. Under California law, the $15.6 million settlement will be paid directly to the state’s general fund.
“This important settlement is a significant win for California businesses and consumers and is the culmination of an extensive effort by insurance regulators across the country to investigate and ultimately correct serious issues of non-compliance by a major national commercial insurer,” Insurance Commissioner Dave Jones said in a statement.
The settlement stems from allegations that AIG, under its former CEO, underreported workers’ compensation premiums for many years so AIG could avoid paying its share of state residual market assessments and taxes. In most states, companies that sell workers’ compensation insurance must fund pools that serve as insurers of last resort to cover injuries at businesses that pose high risks. Following those allegations, AIG’s workers’ compensation insurance competitors also sued, alleging that they paid states more than their fair share of assessments.
AIG will be monitored by the National Association of Insurance Commissioners multi-state working group for a 24-month period to assure future compliance.
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