sinks deeper in insurance
Conflicts of Interest at Marsh & McClennan (MMC): New
York State Attorney General Eliot Spitzer filed a civil suit on October 14, 2003
accusing Marsh & McLennan, which is based in New York, of bid rigging as well
as of failing to properly disclose the incentive fees. Spitzer alleged that because
of these sales practices, corporate customers were not getting the best prices
on property and casualty policies. Corporate clients were being cheated by the
phony bids in arranging their insurance coverage. Marsh has said it collected
about $1.2 billion in such fees since January 2003.
In a move that I find unbelievable are reports that Marsh is still looking to
collect about $230 million in incentive fees at the heart of a bid-rigging probe
as a way to help fund a possible settlement over the very fees being questioned.
Even executives at other insurance companies are amazed at Marsh's announcement.
can't make stuff like this up. At least Jeffrey Greenberg was forced to resign
as CEO of Marsh during this investigation.
What I'd be more interested
in hearing is how the insurance companies plan to rebuild trust and confidence
with their clients.
fully expect to see private lawsuits from companies seeking payback for overcharging
on their property and casualty insurance policies. Lawsuits from shareholders
for loss of value of their investments should also be forthcoming.
after January 14, 2005:
In order to settle this matter, it has been
reported that Marsh has offered $600 Million to resolve lawsuits filed by New
York City. NYC Attorney General Eliot Spitzer is seeking a settlement closer to
$750 Million along with a formal "statement of contrition". Don't expect
Marsh to issue an "apology". Most companies that settle lawsuits out
of court do so without "admission of guilt". "Apologies" tend
to be viewed as admissions of guilt.
2004 - 2005 Nelson Chin.
inquire about consulting or speaking engagements, e-mail: Nelson