Insurance Firm Settles Probe

Companies that bought property and casualty insurance through broker Aon Corp. will receive $190 million in restitution under a settlement announced Friday that ended an investigation into possible anti-competitive business practices.

Chicago-based Aon, the nation’s No. 2 insurance brokerage, will provide the money over three years. Aon also agreed to end the practice of soliciting incentive fees from insurance companies under the agreement with New York, Illinois and Connecticut.

Aon executives said they hoped the settlement would cover inquiries in as many as 17 other states so the firm could move forward.

The agreement, announced by New York Atty. Gen. Eliot Spitzer, was similar to one reported Jan. 31 with Marsh & McLennan Cos., the nation’s largest broker. Marsh & McLennan, which is headquartered in New York, agreed to pay $850 million in restitution to end Spitzer’s investigation into possible bid rigging, price fixing and the use of hidden incentive fees.

Aon shares rose 28 cents to $24.45 on the New York Stock Exchange.

Aon admitted no wrongdoing but acknowledged that some employees had “engaged in improper conduct.”

Aon also “reaffirmed its previous statements that its internal review had found no evidence of price fixing, bid rigging or the solicitation of fictitious quotes.” All were offenses of which Marsh & McLennan had been accused.

The center of the probe was Aon’s use of incentive fees, also known as contingent commissions, that were paid by insurance companies to Aon in exchange for getting more business.

Connecticut Atty. Gen. Richard Blumenthal said these fees -- which are over and above regular commissions -- amounted to kickbacks.

“Aon demanded kickbacks from insurers in exchange for business,” he said. “This hidden ‘pay-to-play’ scheme severely hit both public and private purses.... The scheme inflated prices and stifled competition.”

The complaint also said Aon promised to place business with insurance companies in exchange for the insurers’ agreement to use Aon’s reinsurance brokerage services.

Aon Chief Executive Patrick Ryan issued an apology as part of the settlement. He acknowledged Aon “and other insurance brokers and consultants” used contingent agreements with insurance companies that created conflicts of interest.