Insurer to pay $6 million to Florida and other states
Jan 1, 2008
Sarasota Herald Tribune, 1/1/2008
ST. PAUL, Minn. — The Travelers Cos. Inc., one of the nation’s largest commercial insurers, has settled a lawsuit and separately will pay $6 million to settle several state investigations over how it paid brokers, the company and the Florida attorney general said on Monday. Travelers did not disclose how much it was paying to settle the 2004 shareholder lawsuit over contingent payments to brokers and allegations that it rigged bids. The company had lost an earlier effort to dismiss the suit, which sought class action status. Florida Attorney General Bill McCollum alleged that Travelers conspired with brokers to submit fake bids even though the brokers had already determined which insurer would get business from a policyholder. Travelers paid ‘contingent commissions’ to these brokers, and these commissions were not disclosed to policyholders, according to a complaint signed by one of McCollum’s deputies. Such commissions are additional payments to the broker in exchange for bringing business to the insurer. The settlement still needs court approval. Travelers had already said it would stop paying such commissions on all insurance lines by today, under an agreement with other attorneys general announced Jan. 2, 2007. Sandi Copes, a spokeswoman for McCollum, said Florida’s agreement was reached in the past week. State attorneys general have argued that ‘contingent commissions’ paid to brokers and agents to steer business to insurance companies amount to kickbacks that result in higher prices paid by policyholders. About $1.1 million of the $6 million settlement will go to Florida agencies to fund a reimbursement pool for public policyholders and to repay the cost of the investigation, McCollum’s office said.