This site is NOT affiliated with Zurich Financial Services, Farmers Insurance Group or any of their subsidiaries.
(This is a Free Speech web site critical of Zurich and Farmers Insurance)

Zurich Financial Services Sucks

Zurich Financial Services (Zurich) manages Famers Insurance Group but does not own it.
Farmers Insurance CEO Paul Hopkins is on the Executive Committee of Zurich

I created this site due to my disgust with Zurich which settled lawsuits with US states on bid-rigging. Zurich manages Farmers Insurance Group and they are doing a terrible job of it.


Zurich Financial Services is an insurance-based financial services provider that focuses on North America and Europe, but also has operations in Latin America and Asia/Pacific. Zurich is headquartered in Zurich, Switzerland. Zurich has offices in more than 50 countries. The Company operates in five segments: General Insurance, Life Insurance, Farmers Management Services, Other Businesses and Corporate Center. The Company's core business is General and Life Insurance.

ZURICH SETTLES BID-RIGGING PROBE

Attorney General Eliot Spitzer and State Insurance Department Superintendent Howard Mills today announced an agreement with one of the world’s largest insurance companies to resolve allegations of bid-rigging and improper "finite reinsurance" transactions.

Connecticut Attorney General Richard Blumenthal and Illinois Attorney General Lisa Madigan also joined in today's settlement.

Under the agreement, certain subsidiaries of Zurich Financial Services ("Zurich") will pay $153 million in restitution and penalties and adopt a series of sweeping reforms. In addition, Zurich has issued an apology acknowledging its improper conduct.

"Zurich’s willingness to acknowledge problems, adopt reforms and provide appropriate compensation to customers will help the company move forward and will help promote full and fair competition in the insurance industry," Spitzer said.

State Insurance Superintendent Howard Mills said: "The Zurich policyholders who were adversely affected by Zurich’s conduct will now be able to receive their rightful restitution. New York will continue to insist that insurers operating within our jurisdiction conduct their business in a way that is transparent to policyholders and accurately reported to regulators."

An Assurance of Discontinuance filed with the agreement alleges that Zurich was a full participant in a scheme to fix insurance prices in the excess casualty area.

For example, the assurance cites an e-mail from a Marsh & McLennan Company broker to a Zurich underwriter seeking a phony bid for an insurance contract that was being steered to one of Zurich’s competitors, AIG: "Can you give me a protective indication on this. It is an AIG renewal and AIG already quoted it so just give me a bad price with higher per occ. attachment and then we can be done with this."

Zurich complied with the request and sent Marsh a non-competitive bid to be used to deceive Marsh’s client.

The assurance also details Zurich’s use of improper "finite reinsurance" to bolster both its own financial results and those of its clients. For example, Zurich entered into a 1998 agreement with insurer MBIA, Inc. to provide risk-free "reinsurance" for a known $70 million loss. In exchange, Zurich received a separate risk-free insurance contract that returned the "reinsurance" payment to Zurich with a profit.

In a statement today, Zurich apologized for its actions and acknowledged that "certain of its employees violated both acceptable business practices and Zurich's own standards of conduct by engaging in improper bidding practices and the ‘finite reinsurance’ transactions described in the Assurance of Discontinuance."

Under today's agreements, $88 million will be paid to Zurich policyholders harmed by bid-rigging activities. In addition, Zurich will pay penalties of $39 million to New York and $13 million each to Connecticut and Illinois. Today’s settlement will also have the effect of increasing by $29.9 million the recovery consumers will receive as part of a separate multi-state settlement, announced last week, which arose out of New York’s insurance probe.

In the fall of 2004, the New York Attorney General's office and the New York Insurance Department announced a joint probe of misconduct in the insurance industry. This investigation has resulted to date in guilty pleas from 20 insurance company executives and officers, and the recovery of over $2.6 billion for consumers and workers compensation plans.

The investigation underlying today's Assurance of Discontinuance was conducted by Assistant Attorneys General Michael Berlin, Maria Filipakis, Matthew Gaul, and Mel Goldberg under the direction of David D. Brown IV, Chief of the Attorney General’s Investment Protection Bureau.

Audrey Samers, Deputy Superintendent and General Counsel of the New York State Department of Insurance, Susan Donnellan, Deputy General Counsel of the Insurance Department, and Jon Rothblatt, a principal attorney, led the Insurance Department’s investigation.

Assurance of Discontinuance (AOD) and Voluntary Compliance

Zurich AOD Exhibits

New

Zurich American Implements Reforms, Pays Consumers Millions "Texas led the 15-month investigation, which revealed that Zurich conspired with brokers at the center of the conspiracy in a "pay-to-play" scheme to overcharge policyholders for their commercial insurance policies."..." In a companion settlement of a class action lawsuit in New Jersey, Zurich will be required to distribute about $122 million in refunds to commercial policyholders. These policyholders can obtain information about this class action settlement at" www.insurancebrokerageantitrustlitigation.com/zurich/.

* Florida Orders Universal Underwriters Return $5.3M in Overchargess Universal Underwriters is owned by Zurich Financial Services, the same company that manages Farmers Insurance. "According to Florida Insurance Commissioner Kevin McCarty, the premiums charged on hundreds of commercial policies issued by Universal Underwriters between Jan. 1, 2002, and Sept. 30, 2005, were deemed excessive and above what had been approved as unacceptable." Full Story

* "Agents' opposition to portions of a proposed class settlement with Zurich Insurance has deepened with the filing by the Independent Insurance Agents & Brokers of America (Big "I") of an amicus curiae brief in the U.S. District Court for the District of New Jersey." Full Story. | Independent Insurance Agents Amicus Curiae Brief.

Quotes

“Our investigation revealed that Zurich schemed with insurance brokers and other insurers to rig bids, behavior that led policyholders to pay more for insurance,” Madigan said. (Illinois Attorney General Lisa Madigan)

“Zurich is paying the price for years of unconscionable business practices – showing that greed always comes full circle,” Blumenthal said. (Connecticut Attorney General Richard Blumenthal)

"Zurich conspired with brokers, primarily Marsh & McLennan, in a pay-to-play game making consumers the losers." -Blumenthal

Department of Consumer Protection Commissioner Edwin R. Rodriguez, who signed off on the settlement, said, "Zurich's business model was based on prearranged dishonesty. It provided them with an unfair competitive advantage by directing a scheme of paying undisclosed fees to brokers who funneled them business. This deceptive practice cost policyholders millions of dollars in premiums that trickled down to consumers in higher insurance costs."

Bid Rigging Settlement Documents

New York, Connecticut and Illinois Documents

Assurance of Discontinuance (AOD) and Voluntary Compliance

Zurich AOD Exhibits

Texas, California, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania and West Virginia Documents

Attorneys General agreement with Zurich

Order and stipulated injunction regarding Zurich

Exhibit relating to disclosure requirements

Zurich Bid Rigging Articles

Zurich Financial settles with 3 US states (Zurich is the parent company of Farmers Insurance Group) Zurich agreed to pay $153 million to settle insurance bid-rigging charges by New York, Connecticut and Illinois. The victims include small, mom-and-pop retailers, school districts, governments and large corporations. Forbes 3/27/2006

Zurich American to Settle With 9 States (Zurich is the parent company of Farmers Insurance Group) "Businesses shopping for commercial insurance were deceived into believing they were getting the best deals available," Abbott said in a statement. "The whole anti-competitive scheme was an intentional smokescreen by several insurance players to artificially inflate premiums and pay improper commissions to those who brokered the deals." Said Massachusetts Atty. Gen. Tom Reilly: "Insurance companies will not get away with deceiving their customers, inflating prices or manipulating the insurance marketplace." Insurance Journal 3/20/2006

Zurich Financial Agrees to Pay $153 Mln to Settle State Probes "Zurich Financial, led by 60-year-old American James Schiro, participated in ``a scheme devised by Marsh & McLennan to give commercial policyholders the illusion of a legitimate competitive bidding process,'' Texas Attorney General Greg Abbott said in a March 19 statement announcing the nine-state settlement. '' Bloomberg 3/27/2006

CORRECTED: Zurich Financial settles with 3 US states "Zurich, Switzerland's largest insurer, conspired with other insurers to fix prices in excess casualty coverage, which kicks in after regular property-casualty policies exceed a certain sum, according to New York Attorney General Eliot Spitzer."..."The insurance companies are lining up to settle," said Donald Light, an insurance analyst with Celent LLC. "They regard this as a cost of avoiding a worse fate: being indicted and put out of business." Reuters 3/27/2006

Md. consumers share in $152M insurance settlement "The attorneys general alleged Zurich paid undisclosed "contingent commissions" -- commissions based on the amount or profitability of coverage sold -- to insurance brokers. The states also claimed Zurich submitted fake bids for some business "to create the illusion of a competitive bidding process," when insurance brokers had already chosen to give the business to another insurer for an inflated price. In return, the attorneys general claim, Zurich was promised protection from competition on lucrative accounts of its own." bizjournals 3/20/2006

Massachusetts AG Reilly Announces $171 Million Settlement "Bid-rigging is a serious offense that will not be tolerated in Massachusetts," said Attorney General Tom Reilly. "Insurance companies will not get away with deceiving their customers, inflating prices, or manipulating the insurance marketplace." allamericanpatriots 3/19/2006

Zurich American settles insurance probe In announcing the settlement, Spitzer cited an e-mail from a Marsh broker to a Zurich underwriter seeking a phony bid for an insurance contract that Spitzer said was being steered to American International Group Inc. The e-mail included: “Can you give me a protective indication on this. It is an AIG renewal and AIG already quoted it so just give me a bad price with higher per occ. attachment and then we can be done with this.”...“Zurich also secretly paid contingent commissions to brokers in exchange for the brokers steering business to Zurich.” msnbc 3/27/2006

Zurich American Insurance Executives Plead Guilty Two employees from Zurich American Insurance Company have pleaded guilty to criminal charges in connection with a bid rigging scheme, New York Attorney General Eliot Spitzer announced. The employees both were senior underwriters at Zurich. ConsumerAffairs 11/16/04

Class Action Against Zurich

Zurich Financial Services (ZFS) is a defendent in a class action lawsuit. Converium operated under the name Zurich Re, which was the reinsurance business of Defendant ZFS. Prior to Converium’s IPO, Converium was a wholly-owned subsidiary of ZFS. Also named in the lawsuit are the Company’s Executive Committee members: Dirk Lohmann, Martin Kauer and Richard Smith.

United States District Court Southern District of New York Case: 04 Civ. 7897 Class Action Complaint

Links

Zurich Sucks - Site owner documents his terrible experience dealing with Zurich North American Insurance.

Zurich Help Point, The Lie -"We denounce the modi operandi of Financial and Zurich Insurance Group (ZFS) of Zurich, Switzerland, tax havens and currently in the spotlight for financial irregularities, the 'greed' excessive of these companies. This page is aimed at victims and affected of this group called Zurich."

Zeroing in on Zurich - "From the Holocaust to the shores of Hawaii"

Mills v. Zurich Life Insurance Company Class Action Copies of the court documents: Zurich Insurance Notice, Zurich Insurance Complaint, Zurich Answer, Zurich Approval, Zurich Final Order, Zurich Distribution Order, Zurich Insurance Settlement Agreement.

 

Avoid all subsidiaries of Zurich including:

American Guarantee and Liability Insurance Company
Licensed in: All states including DC

American Zurich Insurance Company
Licensed in: All states including DC

Assurance Company of America
Licensed in: All states including DC

Centre Group Holdings (U.S.) Limited

Colonial American Casualty and Surety Company
Licensed in: All states including DC, excluding ME, NH

Empire Fire and Marine Insurance Company
Licensed in: All states including DC, excluding OK.

Empire Indemnity Insurance Company
Licensed in: OK

Farmers Group, Inc

Farmers New World Life Insurance Company

Fidelity and Deposit Company of Maryland
Licensed in: All states including DC, PR, Guam, U.S. Virgin Islands

Maine Bonding and Casualty Company
Licensed in: AK, AR, DC, ME, MA, NE, NH, ND, OH, OR, RI, SD, VT, WA

Maryland Casualty Company
Licensed in: All states including DC, PR, U.S. Virgin Islands, Guam

Maryland Insurance Company
Licensed in: AL, AK, AR, DC, ID, IL, IA, KY, LA, NE, NM, ND, OK, OR, SD, TX, WA, WI

Maryland Lloyd's
Licensed in: TX

National Standard Insurance Company
Licensed in: AL, AK, AR, DC, ID, IA, KY, LA, NE, NM, ND, OH, OR, OK, SD, TX, WA

Northern Insurance Company of New York
Licensed in: All states including DC

Risk Enterprise Management Limited

Steadfast Insurance Company
Licensed in: DE

Universal Underwriters Insurance Company

Valiant Insurance Company
Licensed in: All states including DC, excluding HI, MA, NV

Zurich American Insurance Company
Licensed in: All states including DC, PR, U.S. Virgin Islands

Zurich American Insurance Company of Illinois
Licensed in: All states including DC, excluding AL, DE, HI, ME, MA, NH, NJ, NY, NC, PA, VT, WA, WY

Zurich Capital Markets, Inc.

Zurich Holding Company of America, Inc.

Attorney General Abbott Announces $171 Million Settlement In Insurance Bid-rig Case

Zurich American Insurance Co. to repay policyholders for widespread price-fixing

AUSTIN - Texas Attorney General Greg Abbott today announced that Texas and eight other states have reached a $171 million settlement with Zurich American Insurance Co. relating to widespread bid-rigging and price-fixing in the commercial insurance market.

The settlement means that policyholders in the 9 states will receive over $150 million in refunds, with an estimated $11 million directed to Texas commercial policyholders. Zurich will pay an additional $20 million in lieu of civil penalties as well as reimbursement for attorneys fees and investigative costs.

“Businesses shopping for commercial insurance were deceived into believing they were getting the best deals available,” said Attorney General Abbott. “The whole anti-competitive scheme was an intentional smoke screen by several insurance players to artificially inflate premiums and pay improper commissions to those who brokered the deals.”

The states’ probes, led by Texas, revealed that Zurich failed to disclose it paid “contingent commissions” to insurance brokers and conspired with brokers at the center of the conspiracy in a “pay-to-play” scheme to overcharge commercial policyholders for their insurance policies.

Zurich participated in a scheme devised by broker Marsh & McLennan to give commercial policyholders the illusion of a legitimate competitive bidding process on policies. In fact, Marsh had secretly pre-designated certain insurers to win bids, but the results for the policyholders were actually inflated rates, not best bids.

For its part, Zurich showed a willingness to submit fake quotes and was rewarded with protection from competition so it could set artificially high premiums and profit on other lucrative accounts. The brokers also engaged in anti-competitive conduct by steering contracts away from insurance companies that refused to participate in the scheme.

The direct victims of the bid-rigging scheme were large and small companies, nonprofit organizations and government offices that purchased commercial lines of insurance from Zurich.

The multistate coalition supporting Attorney General Abbott and Texas includes California, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania and West Virginia. The final terms of the settlement are subject to court approval and will be enforced through a judgment in state court.

Attorneys General agreement with Zurich
Order and stipulated injunction regarding Zurich
Exhibit relating to disclosure requirements


Attorney General Lockyer Announces $171.7 Million Settlement with Zurich Insurance to Resolve Bid Rigging, Pay-to-Play Allegations
Settlement Will Provide Business Clients $151.7 Million in Restitution

March 20, 2006

06-024
FOR IMMEDIATE RELEASE
(916) 324-5500

(SACRAMENTO) – Attorney General Bill Lockyer today announced Zurich American Insurance Company (Zurich) will pay $151.7 million in restitution and reform its business practices to settle allegations that it unlawfully rigged bids for commercial insurance and made undisclosed payments to brokers for steering clients to Zurich.

“Zurich participated in schemes with brokers and other insurers that inflicted financial harm on businesses and damaged the marketplace,” said Lockyer. “This settlement holds Zurich accountable for its misconduct, compensates clients it harmed, and provides reforms and ongoing enforcement by Attorneys General to help ensure the company does not commit similar abuses in the future.”

The settlement resolves antitrust and unfair business practices investigations by Lockyer and Attorneys General in nine other states. Lockyer within weeks formally will file California’s settlement in state court.

The alleged bid rigging scheme worked like this: Insurers submitted phony, inflated bids, knowing there was no real competition and that the winner had been predetermined. The designated winner also would submit an inflated bid, but lower than its “competitors.” Brokers then told clients that the winning bid was the best deal available. Brokers guaranteed the “losers” they would win other bids pursuant to the same, rigged process, and allegedly threatened to punish insurers who balked at participating.

The clandestine bid rigging defrauded business clients and caused them to pay artificially high prices for commercial insurance, officials said. The investigation by Lockyer and other Attorneys General found that Zurich played a central role in the bid rigging scheme, along with major brokers and other insurers.

The second targeted practice involved undisclosed “contingent” payments made by insurers to brokers. In addition to standard commissions, which were disclosed to insured businesses, major national insurers allegedly made secret payments to brokers based on how much clients the broker steered to them and kept for them.

The contingent payments posed a potential conflict of interest for brokers by creating an incentive to sell insurance that earned them extra fees, instead of coverage that best fit the needs and pocketbooks of their clients. The contingent payments should have been fully disclosed to business clients, said Lockyer, so they had all material information they needed to make informed decisions.

The restitution will be provided to Zurich customers eligible to receive compensation in a private class action lawsuit now pending in New Jersey federal court. The money will be allocated among the settling states under a schedule to be developed by the private class action counsel, in consultation and cooperation with the Attorneys General. That allocation plan, which must be approved by the New Jersey federal court, and other factors will determine how much of the $151.7 million ultimately goes to eligible California businesses, said Lockyer.

Aside from the restitution, the settlement requires Zurich to pay the states a total of $20 million to cover their costs and fees.

To guard against future unlawful practices, the settlement requires Zurich to adopt specific reforms of the way it conducts its business. Zurich will be prohibited from submitting artificially inflated bids or colluding with others to rig bids. And prior to a commercial insurance policy taking effect, Zurich must disclose to prospective clients whether the compensation it pays a broker includes contingent compensation.

Zurich also will be required to implement a compliance program that includes employee training and other measures to prevent, report and punish improper conduct. If an Attorney General believes Zurich has violated the settlement’s terms, the Attorney General must notify Zurich and give the company a chance to cure the alleged violation. If Zurich fails to remedy the problem within 60 days from the notification date, the Attorney General can go to court to compel compliance.

In addition to California, the other settling states include: Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania, Texas, Virginia and West Virginia.

Lockyer in October 2004 launched an investigation into bid rigging and contingent payments in the commercial insurance industry. The broader investigation remains ongoing.

 

MADIGAN: SETTLEMENT REACHED WITH ILLINOIS INSURANCE COMPANY ZURICH; INVESTIGATION UNCOVERED UNLAWFUL BID-RIGGING SCHEME

Chicago – Illinois Attorney General Lisa Madigan, New York Attorney General Eliot Spitzer and Connecticut Attorney General Richard Blumenthal today announced a $153 million settlement agreement has been reached with Schaumburg-based Zurich American Insurance Company over charges that the insurance giant engaged in bid-rigging, steering of insurance business and accounting misconduct.

The agreement requires Zurich to pay back $88 million to policyholders, specifically including Illinois policyholders, who were the victims of Zurich’s scheme to rig bids on excess casualty insurance policies. The specific amount each individual policy holder will receive has not yet been determined. The company did not disclose to its policyholders that it was colluding with other insurers and brokers to rig bids for excess casualty insurance. Under the agreement, Zurich also will pay $65 million in penalties and payments to the three states, including $13 million to Illinois.

Additionally, the agreement requires Zurich to reform critical business practices. Under the agreement, Zurich will sharply curtail its use of “contingent commissions,” paying no contingent commissions on excess casualty insurance placements through 2008. Contingent commissions are payments that insurers pay to brokers and agents in addition to the base commissions. Contingent commission amounts generally are based on the volume and profitability of the business a broker or agent produces for an insurance company. Madigan’s investigation found that, because contingent commissions are based on volume and profitability, they encourage brokers and agents to improperly steer their clients to particular insurers, even if that is not in the clients’ best interest.

In addition, Zurich has agreed to stop paying such commissions in any line of insurance in which companies with 65 percent of gross written premiums do not do so. The company also has agreed to support legislation banning contingent commissions and requiring greater disclosure of compensation to brokers and agents.

Under the agreement, Zurich also has agreed that later this year it will use a special Web site to provide new disclosures about ranges of compensation paid to brokers and agents by insurance products.

The Division of Insurance within the Illinois Department of Financial and Professional Regulation (IDFPR), along with the New York Insurance Department and the Connecticut Insurance Department, will monitor Zurich’s compliance with these new business reforms.

“Our investigation revealed that Zurich schemed with insurance brokers and other insurers to rig bids, behavior that led policyholders to pay more for insurance,” Madigan said. “Zurich also secretly paid contingent commissions to brokers in exchange for the brokers steering business to Zurich. This settlement, along with other recent similar settlements, will go a long way toward ensuring transparency and fairness in this industry.”

“Zurich’s willingness to acknowledge problems, adopt reforms and provide appropriate compensation to customers will help the company move forward and will help promote full and fair competition in the insurance industry,” Spitzer said.

Zurich is paying the price for years of unconscionable business practices – showing that greed always comes full circle,” Blumenthal said. “This settlement returns millions to policyholders and taxpayers for a scheme that manipulated the market and conned consumers. These bid rigging and kickback schemes harm not only consumers, but honest businesses – and the entire Connecticut economy. Our investigation into the insurance industry is continuing aggressively – changing the way companies like Zurich do business and obliterating a culture of corruption.

Madigan said this settlement is a product of a wider ongoing probe of misconduct in the insurance industry. One of the previous results of the investigation was Madigan’s $190 million settlement with Chicago-based insurance brokerage firm Aon in March 2005. That settlement, which also included the New York and Connecticut Attorneys General, similarly dealt with contingent commissions and improper steering.

Madigan’s investigation was conducted in cooperation with the IDFPR’s investigation of Zurich’s conduct. IDFPR has primary responsibility under Illinois law for regulating the insurance industry.

Public Interest Division Chief Benjamin Weinberg and Public Interest Division Deputy Chief Brent Stratton are handling the case for Madigan’s office.

 

Attorney General Announces $153 Million Multi-State Settlement With Zurich For Bid Rigging Scheme; $13 Million Penalty To Be Paid To Connecticut

March 27, 2006

Attorney General Richard Blumenthal today announced that Zurich American Insurance Company will pay $153 million in an agreement with Connecticut, Illinois and New York to settle allegations it rigged bids and secretly paid insurance brokers hundreds of millions of dollars in exchange for steering business to Zurich.

Under the settlement, Zurich will pay $13 million in penalties directly to the State of Connecticut and $88 million to policyholders overall. Among the major Zurich policyholders in Connecticut victimized by the bid rigging are Bridgeport Hospital, Fidelity National, Hexcel Corp. of Stamford and Hubbell, Inc. of Orange.

Zurich has agreed to adopt sweeping business reforms and pay millions to policyholders and taxpayers for the kickback and bid rigging scheme that spanned several years.

Since at least the mid-1990s Zurich and other insurers paid hundreds of millions of dollars in so-called "contingent commissions" to the world's largest insurance brokers, including Marsh & McLennan Companies, Inc., Aon Corporation, Willis Group Holding Ltd., and Arthur J. Gallagher & Co., as well as thousands of smaller brokers and independent agents.

In exchange for these contingent commissions, brokers agreed to steer new insurance polices to Zurich, and maintain existing Zurich policies with increased premiums. Blumenthal said the bid rigging had the effect of raising premium prices for insurance consumers and steering business to Zurich.

"Zurich is paying the price for years of unconscionable business practices - showing that greed always comes full circle," Blumenthal said. "This settlement returns millions to policyholders and taxpayers for a scheme that manipulated the market and conned consumers. These bid rigging and kickback schemes harm not only consumers, but honest businesses - and the entire Connecticut economy. Our investigation into the insurance industry is continuing aggressively - changing the way companies like Zurich do business and obliterating a culture of corruption.

"Zurich conspired with brokers, primarily Marsh & McLennan, in a pay-to-play game making consumers the losers. This major settlement returns money to policyholders who were duped, as well as states that have conducted these national investigations. Our investigations are active and ongoing and more results are anticipated."

Department of Consumer Protection Commissioner Edwin R. Rodriguez, who signed off on the settlement, said, "Zurich's business model was based on prearranged dishonesty. It provided them with an unfair competitive advantage by directing a scheme of paying undisclosed fees to brokers who funneled them business. This deceptive practice cost policyholders millions of dollars in premiums that trickled down to consumers in higher insurance costs."

Illinois Attorney General Lisa Madigan said, "Our investigation revealed that Zurich schemed with insurance brokers and other insurers to rig bids, behavior that led policyholders to pay more for insurance. Zurich also secretly paid contingent commissions to brokers in exchange for the brokers steering business to Zurich. This settlement, along with other recent similar settlements, will go a long way toward ensuring transparency and fairness in this industry."

In the scheme Zurich participated in, brokers purported to offer unbiased recommendations to their clients about the selection of insurers when, in fact, the brokers' recommendations were biased toward insurers - like Zurich - who paid secret contingent commissions.

Marsh, Zurich and other insurers rigged the bidding process for excess casualty insurance policies and actively deceived clients. In the area of excess casualty insurance - which covers insurance claims above the limits provided by a policyholders' primary insurance - Zurich is a major provider.

Where Zurich was the incumbent insurer, Marsh generally sought to protect Zurich in the renewal bidding - and gave Zurich an unfair competitive advantage by seeking out non-competitive bids from other insurers.

In order to ensure that Zurich won business, Marsh instructed other insurance companies to provide intentionally losing bids that were inferior to those provided by Zurich. These losing quotes were dubbed "fake," "backup," "supportive" or "protective quotes," as well as "B Quotes" or simply "B's."

Insurance companies agreed to provide fake bids with the understanding that they would be the beneficiaries on other occasions. This bid rigging gave clients the impression that Zurich's bid was the best available.

Under the settlement, Zurich will pay $88 million into a fund by May 1 to pay back policyholders who purchased or renewed Zurich excess casualty insurance through Marsh from Jan. 1, 2000 through Sept. 30, 2004.

Payments to participating policyholders will begin in March 2007.

In addition to the payments to policyholders, Zurich will pay $65 million as a penalty to the states. Of that amount, $13 million will go to Connecticut.

In an apology accompanying the settlement, Zurich acknowledges "that certain of its employees violated both acceptable business practices and Zurich's own standards of conduct by engaging in improper bidding practices and the finite reinsurance transaction described in the Assurance of Discontinuance. Zurich is aggressively tightening its business controls to make certain that this type of conduct does not occur again. As part of Zurich's larger effort to promote transparency and a "level playing field" in the insurance industry, Zurich has agreed to support legislation in the U.S. to eliminate contingent compensation paid to brokers and agents."

Under the settlement, by Sept. 1, Zurich will submit a report to the attorneys general explaining its intended business reforms concerning employee conduct.

 

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This site is published as a public service to warn consumers of the business practices of Zurich Financial Services, Zurich Insurance and Farmers Insurance Group.  This site is in no way affiliated, connected with, or sponsored by Zurich Financial Services, Zurich Insurance, Farners Insurance any of its subsidiaries. All content and information on this site is my opinion or the opinion of those referenced. This site is for educational purposes.  We are not responsible for accuracy in story content. Copyrighted material has been used for non-commercial purposes only.  By accessing this site you agree to immediately contact us to report any incorrect data or misrepresentations of facts. Links to any other sites are for informational purposes only and should not be considered an endorsement of the site.