- The Washington Times - Sunday, March 19, 2006

DALLAS (AP) — Zurich American Insurance Co. agreed to pay $171 million in a deal with Maryland and eight other states to settle accusations of bid rigging and price fixing in the commercial insurance market, state officials said yesterday.

With the settlement, policyholders in the nine states will receive more than $150 million in refunds, the attorneys general in Texas and Massachusetts said yesterday.

The U.S. unit of Zurich Financial Services will pay at least $20 million in investigative costs to the states, said the office of Texas Attorney General Greg Abbott.

The settlement is the latest in a broad investigation by state authorities into the practice of “contingent commissions” that insurers paid brokers. Regulators say the commissions were part of a scheme between the companies and brokers to inflate premiums and overcharge commercial policyholders.

The states in the Zurich settlement are California, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania, Texas and West Virginia.

Keith Owens, a spokesman for Zurich American, yesterday confirmed a settlement “to resolve inquiries related to insurance business practices.” He said he had no further details.

Marsh & McLennan Cos. Inc., the nation’s largest insurance broker, agreed in January 2005 to pay $850 million in restitution to settle a New York state investigation into bid rigging, price fixing and the use of hidden incentive fees. The company publicly apologized for “shameful” and “unlawful” conduct.

A spokesman for Marsh & McLennan declined comment yesterday.

Eight persons have been indicted on criminal charges of bid rigging between November 1998 and S6eptember 2004. Previously, 17 executives at five companies pleaded guilty to criminal charges related to the investigation.

Mr. Abbott said Zurich participated in such a scheme with Marsh & McLennan.

“Businesses shopping for commercial insurance were deceived into believing they were getting the best deals available,” Mr. Abbott said. “The whole anti-competitive scheme was an intentional smoke screen by several insurance players to artificially inflate premiums and pay improper commissions to those who brokered the deals.”

Added Massachusetts Attorney General Tom Reilly: “Insurance companies will not get away with deceiving their customers, inflating prices or manipulating the insurance marketplace.”

Final terms of the settlement are subject to court approval.

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