$171 Million Settlement In Insurance Bid-Rig Case
Zurich American Insurance Co. to repay policyholders for widespread price-fixing
AUSTIN - Texas Attorney General Greg Abbott today announced
that Texas and eight other states have reached a $171 million
settlement with Zurich American Insurance Co. relating to widespread
bid-rigging and price-fixing in the commercial insurance market.
The settlement means that policyholders in the 9 states will receive over $150 million in refunds, with an estimated $11 million directed to Texas commercial policyholders. Zurich will pay an additional $20 million in lieu of civil penalties as well as reimbursement for attorneys fees and investigative costs.
|Attorneys General agreement with Zurich|
|Order and stipulated injunction regarding Zurich|
|Exhibit relating to disclosure requirements|
“Businesses shopping for commercial insurance were deceived into believing they were getting the best deals available,” said Attorney General Abbott. “The whole anti-competitive scheme was an intentional smoke screen by several insurance players to artificially inflate premiums and pay improper commissions to those who brokered the deals.”
The states’ probes, led by Texas, revealed that Zurich failed to disclose it paid “contingent commissions” to insurance brokers and conspired with brokers at the center of the conspiracy in a “pay-to-play” scheme to overcharge commercial policyholders for their insurance policies.
Zurich participated in a scheme devised by broker Marsh & McLennan to give commercial policyholders the illusion of a legitimate competitive bidding process on policies. In fact, Marsh had secretly pre-designated certain insurers to win bids, but the results for the policyholders were actually inflated rates, not best bids.
For its part, Zurich showed a willingness to submit fake quotes and was rewarded with protection from competition so it could set artificially high premiums and profit on other lucrative accounts. The brokers also engaged in anti-competitive conduct by steering contracts away from insurance companies that refused to participate in the scheme.
The direct victims of the bid-rigging scheme were large and small companies, nonprofit organizations and government offices that purchased commercial lines of insurance from Zurich.
The multistate coalition supporting Attorney General Abbott and Texas includes California, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania and West Virginia. The final terms of the settlement are subject to court approval and will be enforced through a judgment in state court.