Insurance company permanently changes practices after settlement

John O'Brien Jan. 5, 2007, 5:59am


HARTFORD, Conn. - Connecticut Attorney General Richard Blumenthal announced Tuesday that St. Paul Travelers Companies voluntarily has agreed to permanently stop paying contingent commissions to brokers and agents for certain types of insurance.

In August, Connecticut, New York and Illinois reached a settlement with St. Paul that banned the company from paying contingent commissions for two years.

That same settlement forced the company to pay more in civil penalties than restitution to allegedly affected consumers. Out of $40 million paid in civil penalties, $24 million went to New York and $8 million went to Connecticut and Illinois each.

Blumenthal called that settlement "another blow to a business culture of kickbacks."

The settlement also required St. Paul Travelers to pay $37 million in restitution. The three states charged St. Paul with illegal business steering, customer allocation and bid-rigging.

A letter to Blumenthal's office from St. Paul Travelers indicated that the company would comply with the two-year ban on contingent commissions and keep the policy permanently afterward.

The letter said St. Paul Travelers will "go even further by providing a fixed commission option (no contingent commissions) for all agents on all lines and encouraging all of its appointed agents in all lines to accept a fixed commission in lieu of any contingent commissions in 2007."

Blumenthal has been active in litigation against insurance companies.

"Through aggressive legal actions and settlement negotiations, we have recovered hundreds of millions of dollars in restitution to consumers and collected tens of millions in civil penalties..." he said.

He added that he hopes that St. Paul Travelers' decision helps out in "deflating insurance costs over time."

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