A settlement reached with American International Group will see some funds distributed to Ohio, as well as each of the other 49 states. The agreement is the result of a negotiation conducted with regulatory officials in 2010 that stemmed from a multi-state probe of AIG, examining whether the company had violated reporting rules for premiums on workers’ compensation insurance.
AIG and its workers’ compensation insurance affiliates will pay $146.5 million to settle the allegations made against them.
According to an insurance commissioner involved in the case, the companies involved underestimated their liabilities. These underestimations resulted in skewed premium reporting. Inaccurate reports from companies such as this can cause severe logistical hiccups for state insurance regulators and other groups, as well.
In addition to the financial payout, the settlement requires AIG to review previous financial reports and correct them as needed. The company will also have to reallocate about $2.1 billion of premiums from other lines of insurance to its workers’ compensation funds.
The $146.5-million settlement has to be paid by June 30. The settlement can be broken down into two payments: $100 million for penalties and $46.5 million for additional premium taxes and assessments. An official with the investigation said that, by agreeing to this settlement, AIG has shown that it is committed to a culture of regulatory compliance.
With this case finalized, workers’ compensation will be less likely to experience any unexpected fluctuations in cost, which could end up affecting both employers and employees. It is not known how much Ohio will get in the settlement, but it’s important that insurers learn their lessons from this matter, so that Ohio workers are able to get the compensation benefits they need should they be injured.
Source: Insurance & Financial Advisor, “AIG to pay $146.5M to settle multi-state workers’ comp. allegations,” Bob Graham, June 4, 2012