ACE Group Holdings has agreed to pay $4.5 million to end a bid-rigging and price-fixing case, according to state officials. The monies will be divided among eight states and the District of Columbia.
Florida’s Chief Financial Officer Alex Sink said ACE Group Holdings Inc. and its subsidiaries are paying the multi-state task force to resolve allegations of bid-rigging and price-fixing in the commercial insurance market in their dealings with insurance broker Marsh & McLennan.
In addition to Florida, Hawaii, Maryland, Massachusetts, Michigan, Oregon, Texas West Virginia, and the District of Columbia participated in the investigation and settlement.
Texas, which, according to Attorney General Greg Abbott led the investigation, will receive $1.3 million.
Florida’s Sink said the multi-state investigation revealed that ACE participated in fictitious quoting and steering of business and other schemes in the commercial insurance market, orchestrated by Marsh & McLennan of New York. In the process, large and small companies, nonprofit organizations, and public entities that purchased commercial lines of insurance from ACE were misled into believing they were receiving the most competitive commercial premiums available, according to the CFO.
The Texas AG said the scheme gave commercial policyholders the appearance of a legitimate competitive policy bidding process. Abbott described as an example the case of a large Texas retail company whose excess casualty policy was among the bid-rigged accounts. According to the AG’s petition, Marsh asked ACE to submit a higher bid for coverage than was submitted by a rival insurance company that Marsh secretly pre-selected to win. This gave the prospective policyholder the appearance of real competition among companies, yet ACE’s artificially high quote allowed its “pay to play” competitor to win the account. ACE benefited from the Marsh scheme because on other occasions it was the pre-selected bid winner.
Prior to the settlement, ACE provided reimbursement to a nationwide group of policyholders and adopted business reforms that govern its bidding and underwriting practices. Under the consent decree and final judgment, ACE is required to abide by those reforms and, upon the request of its customers, disclose the actual amount of payments made to insurance brokers.
ACE said it will provide assistance to the states as they continue their investigation.
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