Fla. Officials Report $6M Settlement

Florida Attorney General Bill McCollum, Chief Financial Officer Alex Sink and Insurance Commissioner Kevin McCarty recently announced that Florida and nine additional states have reached a settlement with a large insurance carrier said to be involved in a “pay-to-play” scheme reportedly orchestrated by insurance broker Marsh & McLennan. The Travelers Companies Inc. will pay a multi-state task force $6 million to resolve allegations of improper business steering in the commercial insurance market that resulted in higher premiums being paid by Florida governmental entities, companies and nonprofit organizations. Travelers allegedly conspired with Marsh & McLennan and other brokers to create the illusion of a competitive bidding process by submitting fake bids even though the brokers had already determined which insurer would receive a particular policyholder’s business. Travelers paid “contingent commissions” to these brokers, and these commissions were not disclosed to policyholders. The Florida Attorney General’s Office, Department of Financial Services and Office of Insurance Regulation will receive approximately $1.1 million of the settlement which will fund a reimbursement pool for affected public entity policyholders and repay the state agencies’ costs of investigation. In addition to the financial settlement, Travelers has agreed to a consent decree and final judgment that will provide comprehensive injunctive relief, including a requirement to disclose compensation that Travelers pays to insurance brokers. The company will also be required to disclose to all customers and prospective policyholders the ranges and averages of payments it made to insurance brokers on specific lines of insurance. The consent decree and final judgment were to be filed in Leon County Circuit Court. Travelers has cooperated with the multi-state task force and will provide assistance to the states as they continue their investigation of insurance brokers and other insurers. The company has already reimbursed a nationwide group of policyholders for overcharges and has adopted significant business reforms that govern its bidding and underwriting practices.