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UPDATE 1-Travelers to settle compensation case with states
December 31, 2007 / 3:06 PM / 10 years ago

UPDATE 1-Travelers to settle compensation case with states

(Recasts, adds details on settlement, previous filing)

NEW YORK, Dec 31 (Reuters) - The Travelers Companies (TRV.N), one of the top U.S. insurers, on Monday agreed to settle a class-action suit and investigations by several states into industry-wide insurance practices.

Travelers, the biggest U.S. writer of commercial auto and business insurance, said in a filing that the settlements are subject to court approval, and will not have a material impact on its financial results. It did not provide any settlement amounts.

Travelers said the class-action suit, which has been pending since 2004, involved charges of bid-rigging, contingent commissions and “finite” insurance, according to filings with the U.S. Securities and Exchange Commission.

Contingent commissions were paid by insurers to brokers who brought in the most business to those insurers, even though the brokers were supposed to be working for clients.

Finite insurance are policies with little risk that were sometimes used to inflate earnings or camouflage losses.

A Travelers spokeswoman had no further comment on the filing.

In addition to the class-action settlement, Travelers said it reached agreement with the attorneys general of Florida, Hawaii, Maryland, Michigan, Oregon, Texas, West Virginia, Massachusetts and Pennsylvania and the District of Columbia settling their investigations into compensation and insurance placement.

While contingent commissions are not technically illegal, attorney generals such as Eliot Spitzer, now New York governor, have targeted them because they create a conflict of interest for brokers.

In November, retirement insurer Principal Financial Group (PFG.N) paid $5 million to settle charges by Connecticut Attorney General Richard Blumenthal that it concealed payments to brokers in order to get pension plan business.

In January a U.S. judge in Hartford, Connecticut, will hear a case involving former General Re Corp and American International Group (AIG.N) executives who allegedly conspired to help help AIG inflate reserves on its books by using finite insurance.

Reporting by Ed Leefeldt, editing by Dave Zimmerman

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