Meanwhile, a major insurance brokerage, Willis Group Holdings Ltd. of London, announced that it would stop accepting contingency commissions, the fees that are at the center of a probe announced last week by New York Attorney General Eliot Spitzer.
Marsh & McLennan Cos. Inc., the New York brokerage Spitzer sued Oct. 14, earlier said it was stopping the use of incentive fees. Brokers receive these fees from insurance companies for steering profitable clients the insurer's way.
The federal investigation into AIG in Indiana concerns "nontraditional insurance" or "income smoothing" products marketed by the New York company. They apparently involved agreements with businesses that would appear to be insurance and would be accounted for as insurance, but did not involve any actual risk transfer, AIG said.
AIG said the investigation is directed at a contract between AIG and Brightpoint Inc., a cellular phone distributor based in Plainfield, Ind., that was previously investigated by the Securities and Exchange Commission and resolved in a September 2003 settlement.
In the settlement AIG agreed to pay a $10 million civil fine to settle federal regulators' allegations that it fraudulently helped another company falsify its earnings report and hide losses.
Spitzer's investigation into the insurance industry has focused on contingent commissions, also known as placement service agreements or market service agreements.
In filing his civil suit against Marsh & McLennan, Spitzer called them "payoffs" and also accused the insurance brokerage of bid rigging.
The Willis Group said yesterday that it is introducing what it called a "client bill of rights" to underscore the company's commitment to its clients.
"We want our clients to know that we have heard them loud and clear: They don't like contingency agreements," said Joseph J. Plumeri, the Willis Group's chairman and chief executive officer.