Marsh settles with 30 state regulators
NAIC to ensure broker sticks to Spitzer reform
By Alistair Barr
September 21, 2005
SAN FRANCISCO (MarketWatch) -- At least 30 state insurance regulators announced a settlement with Marsh & McLennan on Wednesday, the latest step in the insurance broker's recovery from regulatory woes that erupted last year.
New York Attorney General Eliot Spitzer sued Marsh (MMC) in October 2004 alleging the broker rigged commercial insurance bids and accepting controversial "contingent commission" payments in return for steering business to favored carriers.
Marsh settled the suit in early 2005 by agreeing to pay $850 million to damaged clients and adopting a series of reforms, including limiting its brokerage compensation to a single fee or commission at the time of placement, banning contingent commissions, and requiring disclosure of all forms of compensation to clients.
Wednesday's agreement with the National Association of Insurance Commissioners, which represents state insurance regulators, will mean that the reforms Marsh adopted can be enforced nationwide, said Mike Kreidler, Washington insurance commissioner and chair of the NAIC subgroup that negotiated the deal.
"It also gives us the ability to make sure the same high standards of practice apply to other insurance brokers as well," Kreidler said in an interview with MarketWatch. "At this point, we have 30 states, but more will wind up signing this settlement."
"This agreement represents an important step forward for Marsh and a reaffirmation of Marsh's commitment to business reform," Michael Cherkasky, chief executive of Marsh & McLennan, said in a statement.
Compensation fund deadline
As part of Marsh's settlement with Spitzer, clients who were deemed damaged by the broker's past conduct had until Sept. 20 to sign up for the $850 million compensation fund.
Washington state's Kreidler said he'd heard an estimate that about half of clients affected had signed up for compensation by the deadline.
"There was quite a rush in the waning hours before the settlement deadline, particularly among those clients who were offered the larger settlement amounts," Kreidler said.
Kreidler added that he expected the degree of participation to be higher, given the amount of money offered by Marsh.
The NAIC said it held off announcing its multi-state settlement with Marsh until Sept. 21 to avoid influencing clients who were trying to decide whether to sign up for compensation from Marsh.