Insurance giant Liberty Mutual has agreed to pay $5.5 million to New York and $2 million to Connecticut, in a settlement agreement over charges that it had rigged bids and paid contingent commissions to agents who illegally steered business to the insurer’s products.
The charges were part of lawsuits filed by former New York Attorney General Elliot Spitzer and Connecticut Attorney General Richard Blumenthal against a group of insurance companies and brokers in 2006 as part of a nationwide investigation into illegal sales practices in the insurance industry.
The lawsuits alleged that Liberty Mutual paid secret commissions to brokers that steered business to it, even though its quotes were not the lowest available. The practice directly increased the cost of insurance to thousands of customers.
Liberty Mutual was also accused of providing “fake” bids to brokers to insure that other companies, agreed to in advance, would win a contract. The lawsuit said that one such bid allowed American International Group to increase its premium by 20 percent with an existing customer.
Other companies, including Marsh & McLelland, St. Paul Travelers, and Aon Corp. have already reached settlement agreements with authorities.
The company blamed the conduct on two former “rogue” employees. “Unfortunately, two former lower-level employees seriously violated our trust and our standards of conduct in their quotation activity,” the company said. Both employees resigned before the 2006 lawsuit was filed.