Connecticut Attorney General Richard Blumenthal said in a Monday news release that The Hartford agreed to establish a $5 million fund for policyholders harmed by improper insurance practices (See Hartford Working to Resolve Spitzer Complaints ) and pay a $26 million penalty to the three settling states – $3 million each going to Connecticut and Illinois, and $20 million to New York.
It will also establish an $84 million fund to compensate market timing investor victims (See Hartford Agrees to Market Timing Compensation with Mutual Funds ), according to Blumenthal.
“The Hartford failed to act swiftly and strongly to stop and disclose market timing – despite its duty to do so,” Blumenthal said, in his press release. “It failed to do enough soon enough to prevent this pernicious practice. The Hartford never encouraged or invited these illegal practices. It knew the harm and was lax and late in halting it. The inadequate response was primarily a corporate failing, not an individual responsibility, reflected in this action to hold the corporation accountable.”
As part of the agreement, The Hartford acknowledged that brokers and agents must disclose their financial motivation to customers before 25 or more policies are moved to The Hartford at one time, and The Hartford service center employees must clearly identify themselves as soon as a consumer calls.
The insurer also gave broker Marsh & McLennan inflated bids that enabled Marsh to charge higher insurance prices to thousands of consumers, the attorney general said. Marsh already paid $850 million in fines and restitution in 2005.
The Hartford revealed in a statement that – in light of the settlement – U.S. Securities and Exchange Commission staff had told Hartford that it would not recommend any enforcement action against the company.
“We are pleased to have these matters behind us,” The Hartford’s Chairman and CEO, Ramani Ayer said in the news release. “Since these investigations began more than three years ago, we have cooperated fully with the attorneys general and other regulators. We have worked assiduously to strengthen and improve our business practices and will continue to do so. We emerge from this period with an unwavering resolve to uphold our longstanding commitment to providing our customers with outstanding products and exemplary service.”
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