For
Immediate Release
NAIC ANNOUNCES MULTI-STATE REGULATORY SETTLEMENT WITH MARSH
Kansas City, MO (September 21, 2005) – Over 30
state insurance regulators working collaboratively through the
National Association of Insurance Commissioners (NAIC) today
announced a multi-state regulatory settlement with the nation’s
largest insurance broker, Marsh & McLennan Cos. Inc.
(Marsh).
The settlement agreement is designed to see that
the extensive compensation and disclosure reforms are implemented by
Marsh. The agreement
adopts Marsh’s agreement made in January 2005 to pay its clients
$850 million in restitution to resolve allegations of fraud and
anti-competitive practices leveled by New York Attorney General
Eliot Spitzer and New York State Insurance Superintendent Howard
Mills.
“I am pleased that the Marsh settlement’s reforms
will be enforced nationwide because of our agreement,” said Mike
Kreidler, Washington Insurance Commissioner and chair of the NAIC
subgroup that negotiated the agreement with Marsh. “Insurance consumers benefit
from fairer treatment and greater disclosure. I commend the state
insurance regulators who made this agreement to protect the
insurance-buying public. It clearly helps move the entire commercial
brokerage industry to a higher ethical standard.”
The business reforms Marsh adopted include
limiting its brokerage compensation to a single fee or commission at
the time of placement, banning contingent commissions, and requiring
disclosure of all forms of compensation to the clients. The participating regulators
will receive ongoing compliance reports from Marsh, have the
authority to enforce reforms, and retain the ability to continue
ongoing investigations with Marsh’s cooperation.
"The
regulatory controls that are embodied in this global agreement
are prudent and comprehensive," said Diane Koken NAIC President and
Pennsylvania Insurance Commissioner. "We recognize that some
customers of Marsh may have reasons not to opt into the
monetary settlement, and we can certainly understand
that. However, expediently returning as much money to as
many consumers as possible was an
important consideration in endorsing this global
settlement. We, of course, continue to work with other
authorities to assure that the individuals at Marsh and other
companies responsible for illegal, or otherwise
inappropriate practices, are punished."
Marsh clients had until Tuesday to join the
settlement pool and release Marsh from further claims. The NAIC
subgroup intentionally withheld its announcement until the deadline
had passed to avoid the appearance of weighing in on whether
eligible clients should opt-in.
Today’s
announcement represents the most recent development in the NAIC’s
coordinated response through the Broker Activities Task Force, which
initiated a three-pronged action plan
designed to engage consumers, provide a solution, coordinate
multi-state inquiries and leverage state expertise and
resources:
Fraud Reporting: As an immediate means to empower consumers,
the NAIC launched a centralized on-line fraud reporting
system to complement similar reporting systems already in place in
some states. This system allows for
anonymous reporting of suspected fraudulent activities through the
NAIC Web site at www.naic.org. Forty
states, including the District of Columbia, are currently accepting
reports of suspected fraud from both consumers and the industry
through the new NAIC system. Additional states are expected to utilize the system in the
next few months.
Full Inquiry and Coordination: The NAIC is coordinating states’ efforts to
question significant domestic insurers and top brokers conducting
business in their respective states. NAIC members are gathering
facts in a standardized fashion, analyzing the issues, and
determining next steps for regulatory intervention. Regulators are
reviewing broker compensation practices across a broad spectrum of
insurance products.
Greater Transparency on Broker
Compensation: To help achieve
a long-term solution, the NAIC adopted amendments to the NAIC’s
Producer Licensing Model Act to address producers’ disclosure of
compensation. Already enacted in five states and introduced in
several others, these amendments are designed to provide consumers
with the necessary information to understand potential conflicts of
interest a producer may have because of the manner in which the
insurance producer is compensated.
The Marsh Settlement (PDF)
Marsh's Statement Regarding the Settlement (from press release on 9-21-05)
About the NAIC
About the NAIC Headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and the five U.S. territories. The NAIC’s overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC is the oldest association of state officials. For more than 135 years, state-based insurance supervision has served the needs of consumers, industry and the business of insurance at-large by ensuring hands-on, frontline protection for consumers, while providing insurers the uniform platforms and coordinated systems they need to compete effectively in an ever-changing marketplace. For more information, visit NAIC on the Web at: http://www.naic.org/press_home.htm
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