The settlement stems from a multi-state investigation the Massachusetts Division of Insurance help lead against the insurer
Insurance Commissioner Murphy and the Division of Insurance announced this morning that American International Group, better known as AIG, has agreed to pay Massachusetts $3.44 million in payments stemming from an investigation into the company’s practice of under-reporting worker’s compensation premiums in the Commonwealth.
“The settlement with AIG is an outstanding example of interstate cooperation in the insurance arena,” said Commissioner Murphy. “While Massachusetts and a few others took the lead in challenging AIG’s practices, every state will benefit financially, and the collective voice of insurance regulators across the country has sent a powerful message to the industry that we share the capability and the will to investigate and resolve even the most complex issues in the insurance market.”
The DOI was one of eight states which led the investigation into AIG’s practices and which resulted in the carrier admitting that it had underreported it’s worker’s compensation premiums over a several year period. AIG’s actions in under-reporting these premiums resulted in a reduction in the amount of premium taxes and assessments the company paid to states.
Under the terms of the Regulatory Settlement Agreement (RSA) brokered between the states and AIG, the insurer has acknowledged the inaccuracy of its previous financial reports with regard to is worker’s compensation line and that such actions resulted in the company under-reporting worker’s compensation premium dollars by approximately $1.2 billion nationwide.
As part of the agreement, the company has rectified the incorrect reports, has paid a $100 million dollar penalty and more than $46.5 million in additional premium taxes and assessments to the states. In addition, AIG has agreed to authorize Massachusetts and its fellow lead states to monitor AIG’s operations for the next two years. It also allows the states, at the end of this monitoring period, to conduct a follow-up examination in order to confirm that AIG is complying with all the rules it has accepted under the settlement agreement.
“The multi-state re-examination will offer a final confirmation that AIG remains committed to a culture of regulatory compliance,” said Undersecretary Barbara Anthony of the Office of Consumer Affairs and Business Regulation, which oversees the Division of Insurance. “The outcome of the AIG investigation underscores the enormous value of our collaboration with regulators across the U.S.”
Today’s announcement represents one of the largest worker’s compensation settlements with the Division of Insurance. The last large settlement occurred in 2009 when Health Markets Inc. agreed to pay $2 million to the DOI. In 2011, the Division collected approximately $600,000 in total from its settlement agreements. In 2010, the number was $200,000.