In a meeting March 4 at the St. Regis Hotel in Washington, some of AIG's biggest competitors urged Bernanke to prevent AIG from using the government rescue to win an advantage, particularly by cutting prices. Mr. Bernanke said he'd look into the complaints, according to people familiar with the meeting.
Industry executives and competitors have said that AIG has been lowering prices to win new business and boost market share after receiving bailout dollars, even as market fundamentals suggest that prices need to be raised.
State insurance regulators in New York and Pennsylvania are investigating, as is the Government Accountability Office (GAO), which issued a preliminary report at last week's congressional hearing on the AIG bailout. The GAO said insurance regulators, brokers and buyers say AIG "may be pricing somewhat more aggressively than in the past in order to retain business," but the pricing didn't appear "inadequate." The GAO said it hadn't "drawn any final conclusions."
The complaints from AIG competitors add to the reservoir of resentment building over government decisions to intervene in the private sector in the name of the public good. Much like diligent mortgage payers who are miffed about government assistance for delinquent borrowers, some insurance executives who managed their businesses prudently object to having to compete with a government-supported AIG.
"AIG continues to be overly aggressive on pricing and terms," Ted Kelly, chief executive officer of Liberty Mutual Group Inc., told investors in early March. "But, of course, if you've got an implicit federal backstop, you can do that stuff."
AIG said in a statement that allegations by rivals "are simply untrue, and are meant to increase pressure on our businesses." The company has won some contracts where it wasn't the lowest bidder and noted that it has lost others to lower-priced competitors.