Aon insurance brokerage agrees to settle three-state probe for $190 million
ALBANY, N.Y. (AP) _ Aon Corp., the world's No. 2 insurance brokerage, has agreed to pay $190 million and adopt reforms to end a bid-rigging investigation by three states. <br/><br/>Under the settlement
Friday, March 4th 2005, 11:44 am
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ALBANY, N.Y. (AP) _ Aon Corp., the world's No. 2 insurance brokerage, has agreed to pay $190 million and adopt reforms to end a bid-rigging investigation by three states.
Under the settlement announced Friday, Chicago-based Aon will provide the money over a three-year period for restitution to policyholders and end contingency fees that critics say drive up insurance prices. The pact ends probes by the states of New York, Illinois and Connecticut.
``The underlying complaint in this case shows that improper conduct was pervasive at Aon,'' New York Attorney General Eliot Spitzer said. ``To its credit, however, the company has acknowledged the problems, has agreed to compensate policyholders and has adopted reforms that will provide greater accountability in the future.''
Aon chief executive Patrick Ryan issued an apology as part of the settlement. He acknowledged Aon ``and other insurance brokers and consultants'' used contingent agreements with insurance companies that created conflicts of interest.
``I deeply regret we took advantage of those conflicts,'' Ryan said. ``Such conduct was improper and I apologize for it.''
Aon said in a statement it will be contacting domestic customers who are entitled to payments from the settlement. The company admits no guilt or liability. It restated that its own review found no evidence of price fixing, bid rigging or the solicitation of phony quotes.
``Today's action compels Aon to change its business model and pay restitution,'' Connecticut Attorney General Richard Blumenthal said. ``Our investigation into insurance industry abuses will continue aggressively, as will our push for reform.''
Spitzer, Blumenthal and Illinois Attorney General Lisa Madigan filed civil lawsuits Friday that accusing Aon of receiving contingent commissions, or special payments from insurance companies above normal sales commissions, that were rewards for steering business to the companies. The lawsuits are expected to be formally settled and dismissed next week.
Industry officials have defended the long-standing practice as acceptable and even beneficial to clients, while the attorney general and state Insurance Department said it distorts the marketplace and cheats customers.
In January, Aon's bigger rival, Marsh & McLennan Cos. based in New York, agreed to pay $850 million in restitution to end Spitzer's investigation into bid-rigging, price-fixing and the use of hidden incentive fees. Marsh publicly apologized for ``shameful'' and ``unlawful'' conduct.