In a Web statement Blumenthal also alleged that Marsh & McLennan illegally steered Connecticut businesses and
consumers to favored insurers in exchange for tens of millions of dollars in undisclosed kickbacks. Its actions increased insurance costs for Connecticut consumers because insurers funded concealed commissions by raising premium rates, Blumenthal charged.
“We have uncovered powerful evidence of a systematic scheme to raise insurance prices,” Blumenthal charged in his Web statement. “We also have strong evidence of bid rigging, victimizing specific Connecticut consumers and companies. In essence, Marsh established a toll booth between insurers and consumers, and the toll exacted was heavy. Creating the illusion of free and open competition, insurers agreed to provide Marsh with rigged or fictitious quotes in exchange for the prospect of submitting winning bids on future placements.”
The company was charged with violating the Connecticut Antitrust Act and the Connecticut Unfair Trade Practices Act.
The scheme worked this way, according to the lawsuit: When a Marsh customer wanted to purchase insurance or renew insurance it already had, Marsh brokers decided which insurer should be given the business and at what price. Marsh’s price was typically a substantial increase – as much as 15% to 20% – over the previous year’s price. After Marsh decided who would win its bogus competition, all insurers were expected to fall into line to ensure the chosen carrier won the “competition.”
The amended complaint identifies several major Connecticut businesses that were harmed by Marsh’s bid-rigging and price-fixing plan, including Hubbell, Inc., Kaman Corp., Hexcel Corp., and Bridgeport Hospital. Marsh has about 2,800 policyholder clients in Connecticut – 300 of them large businesses or government entities. Its corporate clients in Connecticut also include Bic Corporation, United Technologies Corporation, Carvel Corporation, Ethan Allen Furniture, Timex Corporation, Xerox Corporation and General Electric Company.
Blumenthal also announced that insurer ACE Financial Solutions, Inc. has agreed to pay $40,000 to the state to settle allegations for a scheme in which ACE paid Marsh a secret $50,000 commission to steer an $80 million state contract to the company.
A copy of Blumenthal’s newest complaint is here .