MTLA News Roundup
October 14, 2004

Center for Justice, Hood prevail in Medicaid crisis
 
Implantable datachip approved
 
Toll-Free hotline open for disabled voters
 
Computer glitch delays voter machine test
 
Barbour, Cobb chided for speaking to CCC group
 
Stringfellow on closing Oakley and Columbia centers
 
Deficit hits record $214 billion
 
A daily look at Iraq military deaths
 
Lynn Evans details scientists' endorsement of Kerry
 
Marshall Ramsey on the "final debate"
 
NRA endorses Bush
 
Clark, St. Pe clash over land-based casinos
 
AP issues correction on AmSouth story
 
New York Times article

Spitzer Accuses Insurance Industry of Rigging Bids

By JOSEPH B. TREASTER

 

Published: October 14, 2004

Elliot Spitzer, the New York attorney general, filed a lawsuit today accusing the Marsh & McLennan Companies, the world's largest insurance broker, of cheating its corporate customers by rigging bids for the insurance coverage they bought.

At the same time, two executives of the American International Group, one of the world's largest insurance companies, pleaded guilty to criminal charges of rigging bids that Marsh & McLennan presented to its customers, Mr. Spitzer said in a news conference at his office in lower Manhattan.

The lawsuit also names American International, the Hartford Financial Services Group, Ace Ltd. and an American unit of Munich Re as participants in "steering and bid rigging."

As of early afternoon, the defendants could not be reached for comment or had not yet responded to requests for comments.

Mr. Spitzer's investigation, which began earlier this year, has centered on contingency fees that insurance companies pay to insurance brokers who steer them business. Brokers have a fiduciary duty to find the best coverage at the best price for their clients. At issue is whether the fees encourage insurance brokers to put their own interests ahead of the interests of their clients.

These fees are extremely profitable for insurance brokers. By one analyst's estimate, the fees account for roughly 5 percent of the brokerage industry's revenue but can total more than 30 percent of a broker's net income. Shares of insurance companies tumbled after the lawsuit was announced. Shares of Marsh & McLennan were down more than 23 percent in afternoon trading, and those of A.I.G. were down over 11 percent.