NAIC Task Force Announces Insurer Bid-Rigging Settlement
Posted March 23, 2006
KANSAS CITY, MO - (March 20, 2006) - The National Association of Insurance Commissioners’ (NAIC) Broker Activities Task Force today announced the availability of a multi-state regulatory settlement with Zurich American Insurance Company (Zurich) and its subsidiaries, one of the nation’s largest commercial insurers. The settlement is the result of intensive negotiations between state insurance regulators, nine state attorneys general and Zurich.
"This settlement is an excellent example of state insurance regulators’ collaborative leadership on an important regulatory issue," said Michael T. McRaith, Director of the Illinois Division of Insurance and Chairman of the Task Force. "These efforts have resulted in an agreement that prioritizes consumer protection with sensible business reforms. In addition to $150 million in cash payments to insurance consumers across the nation, the settlement requires Zurich to provide significantly enhanced written disclosure to insurance consumers, protecting consumers and enabling them to better evaluate how commissions can impact their choice of coverage and the premiums they pay for that coverage."
While the decision of whether to join the settlement is subject to the individual review and analysis of each state regulator, the NAIC Task Force supports the settlement as a sound regulatory framework with unprecedented consumer protection benefits. The settlement contains monetary relief, corrective measures and business reforms based on Zurich’s alleged participation with various insurance brokers to create a false appearance of market competition in violation of state insurance laws.
State insurance regulators played an integral role in developing the business reforms and disclosure obligations contained in the settlement. All Zurich commercial policyholders will receive information about the base and contingent commission compensation paid to insurance agents and brokers for the placement or renewal of a policy. Zurich will be required to implement a rigorous and comprehensive internal compliance program and to discontinue certain alleged practices, including the production of false or inflated price quotes.
"The Task Force is to be commended for working collaboratively with other state officials to develop this settlement," said Alessandro Iuppa, NAIC President and Maine Insurance Superintendent. "We recognize that individual jurisdictions will independently review the terms, which is a crucial part of the NAIC process. However, insurance regulators support disclosure that gives consumers clear information so they can better evaluate their insurance coverage and premium options."
Today’s announcement represents the most recent development in the NAIC’s coordinated response through the Broker Activities Task Force, which initiated a defined action plan in response to allegations of fraud and anti-competitive practices leveled in October 2004 against Marsh McLennan & Company.
ABOUT THE NAIC
Headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The association’s overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, it is the oldest association of state officials.
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