Insurance firm Travelers Companies, Inc. has entered a consent decree with nine states and the District of Columbia, agreeing to pay US$6 million to settle claims relating to the company’s involvement in a nationwide bid-rigging and price-fixing scheme in the market for commercial insurance. Attorneys general from the settling states are part of a multistate task force that is investigating the industry. The states represented on the task force include Hawaii, Florida, Maryland, Massachusetts, Michigan, Oregon, Pennsylvania, Texas, West Virginia and the District of Columbia.
Travelers and other insurers were charged with conspiring with insurance broker Marsh & McLennan Cos. to submit artificially inflated bids where the broker had preselected the winning bidder. The scheme created the illusion that customers were selecting policies with premiums derived through competitive bidding. Travelers was also charged with paying “contingent commissions,” or profit sharing commissions, in exchange for favorable treatment from brokers. Collectively, such practices resulted in higher insurance premiums paid by insurance customers including companies, nonprofit organizations and public entities. The settlement with Travelers follows similar deals reached with insurers ACE Group Holdings, Inc. in October 2007 and Zurich American Insurance Co. in December 2006