A news release fromAttorney General Richard Blumenthal said the money from the settlement with USI Consulting Group, Inc. (USICG) of Glastonbury, Connecticut, will go to the state’s general fund.
Blumenthal had alleged the firm accepted concealed compensation from insurance companies who were selling Single Premium Group Annuity (SPGA) insurance contracts. USICG is part of USI Holdings Corporation.
The “secret agreements” increased USICG’s overall compensation on the SPGA sales by as much as 33% to 50% and effectively directed business to those carriers willing to pay the contingent compensation, Blumenthal alleged. USICG’s practices – including misrepresentations to plan sponsors and conspiring with carriers in a scheme to deceive its clients – violated Connecticut’s unfair trade practice laws.
USICG has agreed that it will not accept any contingent compensation related to SPGAs. USICG will only accept a specific fee to be paid by the client; a specific percentage commission on premium or product to be paid by the insurer or other provider and set at the time of purchase; or both, the news release said.
USICG has also agreed to disclose to clients all quoted SPGA fees, and will also disclose and then obtain client consents in writing to all commissions/fees in either dollars or percentage amounts paid to USICG.
According to Blumenthal, USICG received hidden payments from The Hartford Insurance Company, The Principal Financial Services Group, Inc., and Mutual of Omaha Insurance since at least 1998, in connection with sales of the SPGA contracts to pension funds. Blumenthal has already reached settlements with the three insurance providers.
Blumenthal charged that in exchange for the payments to USICG, the insurers received competitive information and "last look" bidding opportunities that were not available to annuity providers refusing to make the payments.
"More than the money, this settlement provides business reforms that prevent artificially inflated pension plan costs for private and public companies, non-profits and others," Blumenthal said, in the news release. "Today's settlement stops secret payments to pension plan brokers, ensuring transparency and integrity for certain investments.
Blumenthal continued: "Hidden payments from insurers to brokers, disguised as 'expense reimbursements' and 'administrative costs,' were loaded into SPGA premiums for private and public pension plans nationwide. These payments served only one purpose -- to skew the market in favor of select carriers who were willing to pay to play."
The Connecticut official charged that in carrying out the system involving back-channel payments from annuity providers, the company was motivated by the additional compensation and not, as required, by the best interests of participants.
However, in a statement, Bill Tremko, President of the Retirement Division of USICG, said: "We are confident that we have always acted in the best interests of our clients and have helped them to obtain the most competitive bids from the carriers active in the marketplace at the time."
Noting that he was glad the parties resolved the issue amicably, Jim Kinney, President and CEO of USICG, added: "We have cooperated fully with the Attorney General throughout this investigation and have consistently denied any wrongdoing. Our singular motivation for this settlement is to eliminate any further distractions and continue our practice of serving the best interests of our clients."