ERC internal probe reveals bid rigging with Marsh

by Douglas McLeod
Business Insurance Daily News
Posted Nov. 24, 2004

KANSAS CITY, Mo.—-- An internal investigation by Employers Reinsurance Corp. has found several cases in which two ERC employees agreed with Marsh Inc. employees to rig bids on excess workers compensation insurance placements, ERC disclosed.

In about 10 cases over the last four years, underwriters at ERC, a unit of GE Insurance Solutions, submitted excess workers comp quotes to Marsh and were asked by Marsh executives to resubmit higher quotes, an ERC spokesman said. The ERC underwriters provided the higher quotes knowing that Marsh would not award it the business, the spokesman said.

One of the employees involved in the incidents left ERC three years ago, while another has been suspended since the investigation started, the spokesman said. Premiums quoted in all 10 incidents combined amounted to less than $1 million, he said.

ERC, which received a subpoena from New York Attorney General Eliot Spitzer last week, has provided the results of its investigation to Mr. Spitzer and to the Missouri Insurance Department, according to the spokesman, who said the internal investigation is continuing.

“This is a violation of our integrity policy,” he said of the bid-rigging incidents, which he described as “isolated.”

Mr. Spitzer sued Marsh last month, charging the broker with steering clients to insurers paying it the highest contingent commissions and soliciting inflated quotes to rig placements in favor of insurers it selected. Several insurers agreed to participate in the alleged scheme knowing that they would win a share of Marsh’s business for their cooperation, Mr. Spitzer charged.

Among those his suit cited as participating in the bid-rigging schemes were American International Group Inc., ACE Ltd., Hartford Financial Services Group Inc. and Munich-American Risk Partners.

Copyright 2005 Business Insurance Daily News

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