Boston, MA – Joseph G. Murphy, the Commissioner of the Patrick-Murray Administration’s Division of Insurance, recently announced that the Commonwealth of Massachusetts has received $3.44 million to settle a dispute with American Insurance Group (AIG), which admitted it had underreported workers’ compensation premiums – and thus, underpaid premium taxes and assessments – over several years
The Division was one of eight states which led the investigation into AIG’s practices; all 50 states and the District of Columbia will benefit from the Regulatory Settlement Agreement (RSA) with the insurer.
“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.”
Under the RSA, AIG has agreed that its previous financial reports were inaccurate with regard to its workers’ compensation insurance line, underreporting workers’ compensation premium dollars by approximately $2.1 billion nationwide. In rectifying those reports, AIG has paid both a $100 million penalty and more than $46.5 million in additional premium taxes and assessments to the states.
The $3.44 million, which represents one of the largest workers’ compensation premium settlements with the Division of Insurance, will be placed in the General Fund. The last large settlement was in 2009 when Health Markets Inc. paid $2 million. Last year, the DOI collected about $600,000 in settlements and in 2010 about $200,000 was collected.
The AIG agreement authorizes Massachusetts and its fellow lead states to monitor AIG’s operations for the next two years and then conduct an exhaustive follow-up examination to confirm that AIG is operating under the new rules it has accepted.
“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.”
Source: MA Consumer Affairs and Business Regulation