Company to Ban Contingent Commissions; Disclose Broker Compensation;…

Company to Ban Contingent Commissions; Disclose Broker Compensation; Pay $19 Million LAWFUEL - Legal News Network - Attorney General Eliot Spitzer today announced an agreement with Prudential Insurance Company of America, the second largest group life insurer in the nation, settling allegations of deceptive and anti-competitive practices in the sale of group insurance products to employers throughout the United States. Under the agreement, Prudential will eliminate the payment of contingent commissions to brokers on group insurance products, including life, disability and long-term care, and will provide full disclosure of broker compensation to employers who seek to purchase insurance for their employees through Prudential. Prudential will also provide restitution of $16.5 million to policyholders and pay civil penalties totaling $2.5 million. “Today’s settlement compensates nationwide employers seeking to provide group benefits for their employees” Spitzer said. “This settlement also helps restore integrity to the insurance marketplace by mandating complete disclosure of payments to brokers.” Spitzer’s office began its investigation of Newark, New Jersey-based Prudential in 2004. The probe was an outgrowth of the broader ongoing investigation of bid rigging and steering in the insurance industry. Today’s settlement sets forth allegations concerning Prudential’s payment of undisclosed compensation (“contingent commissions” or “overrides”) to brokers. The investigation revealed that from1999 to 2005, Prudential paid approximately $60 million in overrides to brokers on approximately $18 billion in insurance premiums. Prudential also paid certain brokers case specific overrides or “single case overrides” in order to, among other things, close a deal or encourage future business. On certain occasions Prudential built the cost of these single case overrides into the premiums. Prudential provides group benefits to approximately 19 million employees nationwide. Prudential has had override agreements with such brokers as Marsh & McLennan, Aon Corporation, USI Holdings, Inc., Universal Life Resources and Pacific Resources. The investigation underlying today’s settlement was led by Deputy Attorney General Kermitt Brooks, with Assistant Attorney General Gaurav Vasisht, Public Advocacy Division Special Counsel David Weinstein and Assistant Attorney General John Carroll. Legal Support Analyst Alizabeth Holland assisted in the investigation.

Company to Ban Contingent Commissions; Disclose Broker Compensation;…

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