US investigations into troubled insurance giant AIG have entered a new chapter with the revelation that investigators are to probe the company's accounting of workers' compensation insurance premiums.

US authorities, which have already investigated the global insurer over other business practices and accounting issues, are now suspicious of the company’s records for workers’ compensation insurance. Investigators have alleged that AIG recorded income from the insurance in question as general liability insurance in order to avoid paying out large sums towards compensation funds.

Workers’ compensation insurance provides cover for the cost of medical care, lost wages and rehabilitation for on-the-job injuries and provides benefits for the families of employees killed in work-related accidents. The coverage is available privately but US states also run programs in conjunction with insurers to cover those who cannot afford or be accepted by private policies.

Compensation payments are taken from funds which the alliance of insurers covering a scheme pay into based on their share of the market. US authorities allege that AIG was hiding the size of its share and therefore its responsibility by recording worker’s compensation premiums as other insurance.

New York Attorney General, Eliot Spitzer, said that the accounting practice would have saved AIG tens of millions over the approximate decade that it was happening.

In response AIG said that it had largely corrected the problem by 1997; however, the New York Insurance Department has appointed a consultant to audit the insurer and investigations are ongoing.