Insurer’s settlement will pay off in Hawaii
ST. PAUL, Minn. » The Travelers Cos. Inc., one of the nation's largest commercial insurers, will pay $6 million to Hawaii and other states to settle investigations over how it paid brokers, the company and the Florida Attorney General said last week.
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 St. Paul-based company said it had reached agreements with attorneys general in Florida, Hawaii, Maryland, Michigan, Oregon, Texas, West Virginia, Massachusetts and Pennsylvania and the District of Columbia. The settlement still needs court approval.
Travelers had already said it would stop paying such commissions on all insurance lines by Tuesday, under an agreement with other attorneys general announced last year.
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.