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Nine States Reach Settlement with Marsh Over Bid-Rigging Scheme

Source: Official Site of MA Attorney General


Posted on 07 Jan 2009

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Marsh, Inc., Marsh & McLennan Companies, Inc. has reached a $7 million settlement with nine states, resolving a four-year investigation into the New York-based insurance broker's role in a nationwide bid-rigging scheme. 
 
Marsh executives were accused of playing a "specific role" in a conspiracy to steer clients to favored insurers in a bid-rigging scheme for excess casualty business. 
 
Under the settlement, the nine states being paid $7 million by Marsh include Florida, Hawaii, Maryland, Massachusetts, Michigan, Oregon, Texas, West Virginia and Pennsylvania. Clients have already been offered restitution based on previous agreements with relevant insurance companies and via the State of New York’s prior settlement with Marsh & McLennan Companies. 
 
“Marsh’s conduct underscores the need for strong enforcement and deterrence in the insurance arena,” said Massachusetts Attorney General Martha Coakley, whose state is receiving $1 million of the $7 million settlement. 
 
“Customers need to know they can trust their brokers and that their insurance brokers are working with the customer’s interests at heart. We will continue to closely monitor the marketplace in order to protect insurance customers against unfair and deceptive conduct.”  
 
The intricate bid rigging scheme allowed Marsh to designate which insurance company’s bid would “win” a particular account. To create the appearance of a competitive bidding process, Marsh would instruct certain insurers to submit inflated, intentionally uncompetitive bids. These schemes gave commercial policyholders the impression that they were receiving the most competitive commercial premiums available, when they were actually being overcharged. Additionally, Marsh was involved with a “pay-to-play” arrangement centered on its receipt of contingent commissions, in addition to standard commissions and fees, from certain insurance companies. Contingent commissions, also known as profit sharing commissions, are controversial incentive–based compensation programs offered to brokers by insurance companies. These arrangements were often undisclosed to consumers, and provided an incentive for brokers to steer business to the insurer who offered the most lucrative contingent commissions, often in violation of their clients’ interests. 


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