Marsh & McLennan agreed to an $850 million settlement with New York Attorney General Eliot Spitzer to resolve allegations that the firm participated in a widespread insurance scam that involved rigging bids and paying off brokers, Spitzer's office announced Monday.
The settlement is one of the largest engineered by Spitzer during his three-year crusade against corporate malfeasance.
Under the terms of the deal, the world's largest insurance broker will contribute the $850 million to a restitution fund in four annual installments, the first of which is a $255 payment due June 1. The fund will be used to reimburse affected policyholders, those with start dates between Jan. 1, 2001 and Dec. 31, 2004.
In October 2003, Spitzer accused Marsh of conspiring with American International Group and other insurers to drive up prices for insurance products by rigging bids. He further alleged that Marsh took kickbacks from insurance companies to bring in clients, who were then charged excessive prices for policies.
"To its credit, Marsh is not disputing the problems identified in our original complaint," Spitzer said in a statement. "Instead, the company has embraced restitution and reform as a way of making a clean break from the practices that misled and harmed its clients in the past."
While Marsh did not dispute the transgressions outlined in the complaint, it neither admitted nor denied any wrongdoing. However, it issued a formal apology characterizing its behavior as "shameful" and "unlawful." Marsh ceased its practice of accepting any form of contingent compensation from insurance carriers in October.
As part of the settlement, the company will now disclose all forms of compensation received from insurers and provide customers with price quotes received from insurers. Additionally, Marsh agreed to appoint a chief compliance officer and a compliance committee.
According to Spitzer's office, six executives from three insurance companies have pleaded guilty to criminal charges related to the scheme. The joint investigation by Spitzer and the New York State Insurance Department continues.