According to a press release from Sptizer’s office, under the agreement, Prudential will eliminate the payment of contingent commissions to brokers on group insurance products, including life, disability and long-term care. In addition, the insurer has agreed to provide full disclosure of broker compensation to employers who seek to purchase insurance for their employees through Prudential.
Prudential will also provide restitution of $16.5 million to policyholders and pay civil penalties totaling $2.5 million.
The investigation of Prudential began soon after Spitzer started a broader probe of bid rigging in the insurance industry (See Feds Apparently Join Spitzer Insurance Probe ). According to the press release, the investigation revealed that from 1999 to 2005, Prudential paid approximately $60 million in overrides to brokers on approximately $18 billion in insurance premiums. Prudential also paid certain brokers case specific overrides or “single case overrides” in order to, among other things, close a deal or encourage future business and, on certain occasions, built the cost of these single case overrides into the premiums, Spitzer’s office said.
“Today’s settlement compensates nationwide employers seeking to provide group benefits for their employees” Spitzer said, in the press release. “This settlement also helps restore integrity to the insurance marketplace by mandating complete disclosure of payments to brokers.”