American International Group (AIG) and its workers compensation insurance affiliates have agreed to pay $100m in fines to insurance regulators in all 50 US states and the District of Columbia for alleged premium under-reporting.
Under the settlement signed by the insurance regulators of the eight states that led the examination, the company will also pay approximately $46.5m in additional taxes and assessments.
Under the terms of the settlement, AIG entered into a compliance plan containing agreed-upon specific steps and standards for evaluating ongoing compliance with workers compensation insurance rating and reporting requirements.
AIG will submit periodic internal and state monitoring and a confirmatory examination at the end of 24 months and it agreed to pay a contingent potential fine of up to $150m if AIG fails to meet the terms of the compliance plan.
According to the Pennsylvania Department of Insurance, they found non-compliance with rating, forms and financial reporting laws. Significantly, it found that AIG misreported $2.12bn of workers compensation premium that was reported instead as general or commercial automobile liability premium.
The multi-state examination was led by the states of Delaware, Florida, Indiana, Massachusetts, Minnesota, New York, Pennsylvania and Rhode Island. All the other states and the District of Columbia are participating.
Pennsylvania Insurance Commissioner Robert Pratter said that AIG will pay a significant penalty, $100m divided among the participating states, to resolve violations of insurance laws.
"This reflects the seriousness of the violations in this instance over a sustained period of time -primarily prior to 1996 – by AIG’s prior senior management," Pratter said.