Advertisement
YOU ARE HERE: LAT HomeCollectionsFixme

Insurers Subpoenaed Over Broker Fees

New York Atty. Gen. Eliot Spitzer is seeking data from Aetna, Cigna and MetLife as part of his probe of possible conflicts of interest.

June 12, 2004|From Bloomberg News

Aetna Inc., Cigna Corp. and MetLife Inc. said Friday that they received subpoenas from New York Atty. Gen. Eliot Spitzer amid a widening investigation into possible conflicts of interest over fees collected by insurance brokers.

Spitzer is investigating whether brokers that make money by helping companies choose policies are compromising their client relationships by also accepting payments from insurers. The requests made to Aetna, Cigna and MetLife, which sell group life and health plans, indicate that the probe has expanded beyond fees paid on property and liability coverage.

"It's not a surprise that [Spitzer's] investigations have led him to the employee-benefits area," said Terry Havens, chief executive of Havensure, an insurance broker in Gloucester, Mass. "Many of the negotiations on behalf of companies increase brokers' compensation at their expense." Havensure makes a point of fully disclosing its fees from insurers, Havens said.

The three biggest brokers -- Marsh & McLennan Cos., Aon Corp. and Willis Group Holdings Ltd. -- already have been subpoenaed by Spitzer and have said the collection of fees from insurers is a long-standing practice that they disclose. Aon has said the fees generated $200 million, or 3.5%, of its brokerage revenue last year.

Havens said there were two types of hidden fees widely charged by brokers who help companies choose life and related insurance.

One, called an override fee, is collected from the insurer and is based on the volume of premiums the insurer gets overall from the broker. Brokers often disclose the existence of such fees without quantifying them.

The other type, called a communications fee, is a flat fee assessed directly to employees participating in a plan, Havens said.

It is that fee that may have drawn the attention of Spitzer, who has portrayed himself in other investigations as representing the interests of individual citizens. Spitzer began his investigation of insurance brokers after receiving a letter in February from the Washington Legal Foundation, an advocacy group.

Aetna and Cigna are the third- and fourth-biggest U.S. health insurers, and MetLife is the second-largest U.S. life insurer. Spokesmen for Prudential Financial Inc., the third-largest U.S. life insurer, and UnitedHealth Group Inc., the biggest health insurer, declined to say whether they had been subpoenaed.

Chubb Corp., which sells property and liability insurance, last month said it had received a subpoena. Hartford Financial Services Group Inc., which sells most types of coverage, Thursday became the second major insurer to disclose a request.

American International Group Inc., the biggest commercial property and casualty insurer and life insurer in the U.S., doesn't comment on regulatory matters, spokesman Joe Norton said.

Spitzer spokesman Darren Dopp declined to comment on Friday's subpoenas. Cigna spokesman Wendell Potter said the company was cooperating with the investigation. Aetna and MetLife are also cooperating, their statements said.

Advertisement
Los Angeles Times Articles
|
|
|