Monday, January 31, 2005
Marsh & McLennan Cos. Inc. announced a settlement with New York Attorney General Eliot Spitzer's office on Jan. 31 regarding the complaint filed in October 2004 regarding alleged price fixing in its insurance brokerage unit. The company agreed to create an $850 settlement fund for customers to seek reimbursement for the increased costs from the company practice of soliciting inflated bids. A press release issued by Marsh Mac states that in addition to the settlement fund, which does not include any fine or civil penalty, it will undertake the following corporate reforms:
- MMC has discontinued the practice of receiving contingent compensation from insurance carriers. The company adopted this new policy effective October 1, 2004.
- The company will provide clients with a comprehensive disclosure of all forms of compensation received from insurers.
- The company will adopt and implement company-wide, written standards of conduct for the placement of insurance.
- The company will provide all quotes and terms as received from insurance companies to enable clients to make informed insurance coverage decisions.
- MMC will establish a Compliance Committee of the MMC Board of Directors and has appointed a chief compliance officer.
After Spitzer filed the complaint against the company, he essentially demand that its top management, including former CEO Jeffrey Greenberg, be removed by the board of directors before settlement negotiations could begin. The board complied, and Marsh Mac's new CEO, Michael Cherkasky, came from its Kroll unit and was Spitzer's supervisor in the Attorney General's office earlier in his career. Although the settlement ends the highest profile litigation involving the company's insurance brokerage business, it does not end the lawsuits brought by other states, shareholders, and clients. Look for those cases to be settled soon. (ph)
UPDATE: Settlement agreement here.