State to Check AIG Premiums
The California Department of Insurance said Wednesday that it would examine whether American International Group Inc. underreported its workers’ compensation insurance premiums to state regulators.
Insurance Department spokesman Norman Williams said the agency was alerted by news reports that authorities were looking into AIG’s booking of workers’ comp premiums in New York as part of a larger probe of the insurers’ accounting practices. California regulators, Williams said, “will look into” the matter “to make sure that businesses and consumers are not being hurt by those practices here.”
AIG is the world’s largest insurer and California’s biggest private seller of workers’ comp policies, ranking behind only the state-backed State Compensation Insurance Fund.
In New York, AIG is being audited by state Atty. Gen. Eliot Spitzer’s office and the state’s insurance superintendent to determine whether it understated the workers’ comp premiums it collected so it could reduce its payments to a state fund that pays benefits to injured workers who had been covered by failed insurance companies.
California has a similar guaranty fund but currently has no information that AIG underreported premiums, Williams said. Taxes and fees based on total reported policy sales are used to finance the guaranty fund and administration of the state’s workers’ compensation insurance program, he said. AIG’s workers’ comp premiums in California hit $866 million in 2003.
AIG spokesman Joe Norton said his company was cooperating with all regulators. He said the alleged underreporting of workers’ comp premiums “largely had been corrected by 1997.”
New York-based AIG has been the target of a series of investigations by Spitzer’s office since October, when Spitzer made public an inquiry into alleged bid rigging and special commissions paid by a number of large insurers to commercial brokerages. The continuing investigation is also looking into questionable reinsurance deals.
State Insurance Commissioner John Garamendi and Atty. Gen. Bill Lockyer are examining possible conflicts of interest involving insurance companies and the brokers who help place business with them.
Bloomberg News was used in compiling this report.
