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New York, Pennsylvania probe AIG pricing allegations

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NEW YORK—New York and Pennsylvania insurance regulators say they are looking into allegations that American International Group Inc. is underpricing coverage.

Kermitt Brooks, New York's acting superintendent of insurance, mentioned the investigation during an interview last week with Bloomberg Television. “We're conducting an investigation with Pennsylvania into those allegations, and we are in the middle of an examination to determine whether AIG is writing policies at adequate rates,” Mr. Brooks said, adding that he expected the investigation to be completed in the fall.

A spokeswoman for the Pennsylvania Department of Insurance confirmed Monday to Business Insurance that an “ongoing examination” is under way, but declined to provide further details.

In a report released in March, the Government Accountability Office said it found no evidence that AIG was using federal funds to undercut competitors' pricing (BI, March 23).

At the time, Orice M. Williams, the GAO's director-financial markets and community investment, told the House Financial Services Committee's Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises that a preliminary investigation including talks with insurance buyers, brokers and state regulators showed that while “AIG may be pricing somewhat more aggressively than in the past in order to retain business in light of damage to the parent company's reputation, (GAO investigators) did not see indications that its pricing was inadequate or out of line with previous AIG pricing practices. Moreover, some have noted that AIG has lost business because of the problems encountered by its parent company.”

"The Pennsylvania Department of Insurance, acting as lead regulator for other states including New York, is currently conducting an examination of our property casualty business, which includes among other items a review of pricing relative to the market," AIG said in an e-mailed statement. " Several entities that have reviewed our pricing in the near past, including the GAO, have stated that they found nothing unusual about our pricing or actions in the marketplace. As we have stated previously, we believe that allegations that we are inappropriately underpricing business to retain market share are untrue and are being driven by competitors frustrated by their ability to win market share."