Chubb announced in a press release it will discontinue paying contingent commissions on all insurance lines in the United States beginning in 2007, replacing them with a supplemental compensation program that will reward Chubb’s agents and brokers for superior performance in a manner consistent with evolving marketplace standards and reforms urged by the Attorneys General. The company also said in a separate statement, as part of voluntary actions over the past two years, it has fully disclosed on its Web site all forms of producer compensation utilized in its business.
According to the release, the investigations did not conclude that the firm participated in a pattern or practice of illegal bid-rigging in the excess casualty insurance market. However, Chubb acknowledged it appears to have unknowingly benefited from the bid-rigging activities of others in the excess casualty market, which may have provided the firm with an advantage in retaining certain renewal business.
Due to that fact, Chubb agreed to contribute $15 million to a settlement fund established for the benefit of affected customers and to pay $2 million to help defray the costs of the investigation by the Attorneys General.
Other voluntary actions Chubb revealed in its separate statement include that the Board adopted a Legal Compliance and Ethics Charter and created a Chief Ethics Officer reporting directly to the Audit Committee, and the firm voluntarily ceased a number of practices which might appear to provide an incentive for the “steering” found objectionable by the Attorneys General, including loans to producers, funding of producer compensation, and using an entity co-owned with its producers (Mountain View Indemnity) to reinsure certain risks.
In the May 8, 2006 News Dash, we reported Chubb also faced a lawsuit by the attorney general of Ohio involving the payment of contingent commissions to brokers and agents, along with finite insurance arrangements.
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