Oregon Department of Justice

Attorney General Ellen F. Rosenblum

Oregon Department of Justice - Attorney General Ellen F. Rosenblum
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January 29, 2008

Oregon Attorney General Hardy Myers today announced that Oregon has entered into a settlement agreement with another large insurance carrier involved in a "pay to play" scheme devised by insurance broker Marsh & McLennan.

Named in a Stipulated General Judgment filed in Marion County Circuit Court is American International Group, Inc. (AIG), headquartered in New York City. Today's filing marks the fourth judgment obtained by the Oregon Department of Justice against a national insurance carrier involved in alleged schemes in the commercial insurance market.

Oregon, eight other states and the District of Columbia's investigation revealed that AIG participated in widespread, deceptive bid-rigging, price-fixing and other insurance schemes, orchestrated by Marsh & McLennan. In the process, large and small companies, nonprofit organizations, and public entities that purchased commercial lines of insurance from AIG were often misled into believing they were receiving the most competitive commercial premiums available.

"Commercial policyholders were told by AIG that the bidding process on policies was competitive, which was opposite from the truth," Myers said. "Investigators found AIG operated similar to the previous three companies named in earlier court orders by secretly rigging bids for certain insurers to win resulting in inflated rates for policyholders."

AIG conspired with brokers at the center of the "pay-to-play" scheme to overcharge policyholders for their commercial insurance policies. The scheme was successful because insurers such as AIG earned its preferred status by paying "contingency commissions" to insurance brokers but failed to disclose those payments to policyholders.

"As the leading excess casualty insurer, AIG appeared to benefit from Marsh's solicitation of protective quotes more than any other insurer that participated in the scheme," Myers explained.

Prior to the settlement, AIG paid out compensation for overcharges to a nationwide group of policyholders and adopted significant business reforms that govern its bidding and underwriting practices. AIG will be required to abide by those reforms and must disclose the compensation it pays to insurance brokers.

Under today's judgment, AIG agreed to pay Oregon more than $680,000 as part of a $12.5 million settlement with the multi-state task force. Oregon's portion will be deposited in the Department of Justice Consumer Protection and Education Fund.

Consumers wanting more information on this case and Oregon consumer protection in general may call the Attorney General's consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. DOJ is online at www.doj.state.or.us.


Jan Margosian, (503) 947-4333 (media line only) jan.margosian@doj.state.or.us |
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