CFO Sink, Attorney General McCollum Announce $4.5 Million Insurance Settlement

Florida Chief Financial Officer Alex Sink and Florida Attorney General Bill McCollum today announced a multi-state settlement with several insurance brokers.  The press release on the matter  issued by the Florida Office of Insurance Regulation is below, along with a link to the settlement document for your review.

Should you have any questions or comments, please do not hesitate to contact this office.

 

Sink, McCollum Announce $4.5 Million Insurance Settlement

Company and subsidiaries settle multi-state bid-rigging and price-fixing claims
 
TALLAHASSEE–Florida Chief Financial Officer Alex Sink, Florida Attorney General Bill McCollum and Florida Insurance Commissioner Kevin McCarty today announced that Florida and other states have reached a settlement with a large insurance carrier involved in a “pay to play” tactic used with Marsh & McLennan and other insurance brokers.  ACE Group Holdings, Inc. and its subsidiaries will pay a multi-state task force $4.5 million to resolve allegations of bid-rigging and price-fixing in the commercial insurance market that resulted in higher premiums being paid by Florida governmental entities, companies and nonprofit organizations.

“It’s wrong that governments and businesses paid inflated insurance rates because they were led to believe there was competition when there wasn’t,” said CFO Sink, who oversees the Department of Financial Services which served a lead role in the multi-state investigation along with the Attorney General’s Office and the Office of Insurance Regulation.  “I applaud today’s settlement, because policyholders deserve to know exactly what they are paying for and that they are paying a fair price for it.”

In addition to the financial settlement, ACE has agreed to a consent decree and final judgment in Leon County Circuit Court that will provide comprehensive injunctive relief, including the disclosure of any compensation that ACE pays to insurance brokers.  This settlement marks the second agreement Florida has reached with insurance carriers involved with Marsh using “pay to play” tactics.

 “The insurance industry must ensure that Florida policyholders are treated fairly,” said Attorney General McCollum. “We will continue our efforts to restore accountability and transparency to insurance markets.”

“Ensuring that there is full disclosure in insurance transactions is essential,” said Commissioner McCarty.  “This settlement is another step toward establishing a national standard for transparency in insurance transactions and it helps to further the Office of Insurance Regulation’s efforts and commitment to protect Florida consumers.”

ACE allegedly conspired with Marsh and other brokers by submitting fake bids to create the illusion of a competitive bidding process, even though the broker had already determined which insurer would receive a particular policyholder’s business. ACE was rewarded by brokers, who steered other lucrative business to it.  ACE paid “contingent commissions” to these brokers, and these commissions were not disclosed to policyholders.  

Prior to the settlement, ACE provided reimbursement to a nationwide group of policyholders and adopted significant business reforms that govern its bidding and underwriting practices.  Under the consent decree and final judgment, ACE will be required to abide by those reforms and, upon the request of its customers or prospective policyholders, to disclose the actual amount of payments made to insurance brokers. ACE has cooperated with the multi-state task force and will provide assistance to the states as they continue their investigation of insurance brokers and other insurers. 

In addition to Florida, the following states participated in the investigation and settlement: Hawaii, Maryland, Massachusetts, Michigan, Oregon, Texas, West Virginia and the District of Columbia.

A pdf version of the signed and dated Settlement Agreement between ACE and the Settling Attorneys General is available at http://www.MyFloridaCFO.com/images/ACEOrder.pdf .