Eliot Spitzer's run at insurance broker Marsh & McLennan Cos. (MMC) looks increasingly as if it could be just the opening battle in a wide-ranging war against abuses in the insurance industry. The crusading New York Attorney General is expected to bring criminal fraud charges against at least three Marsh employees in the next several weeks for their alleged roles in bid-rigging on insurance contracts, sources close to the investigations say. Spitzer is also moving quickly to take on other brokers and will soon begin probing insurers directly, including property-casualty, health, and life insurers.
Marsh declined to comment on the potential charges, but the AG may soon put other companies on the hot seat as well. The office is expected to use tactics similar to those employed in the Marsh case against other brokers: bring civil complaints against companies and criminal charges against individuals. According to sources, the two most likely targets of investigation are Chicago-based Aon Corp. (AOC) and the New York office of Britain-based Willis Group Holdings Ltd. (WSH), the industry's next two largest players. Willis and Aon say they have been cooperating fully with Spitzer's probe.
After that, Spitzer wants to take on property-casualty insurers. A spokesman says four companies named in Spitzer's complaint against Marsh as participants in bid-rigging -- American International Group (AIG), ACE (ACE), Hartford Financial Services Group (HIG), and Munich-American RiskPartners -- may be named as defendants, though it's unclear at this point what the charges would be. AIG says it does not comment on subpoenas. AIG and Hartford say they are cooperating fully. ACE declined to comment. Munich did not comment. In all, 16 property-casualty insurers have been subpoenaed for information.
Spitzer's net could also soon snare health and life insurers. His team of lawyers in the New York investor-protection bureau is investigating whether benefits managers -- brokers who help companies or other large organizations purchase the insurance offered to their employees -- have also engaged in alleged misconduct.
The health-insurance investigation is in a preliminary stage. But Hartford-based Aetna Inc. (AET) says it received a subpoena from Spitzer's office in September for information regarding broker-compensation issues. Philadelphia-based accident-and-health insurer CIGNA Corp. (CI) has also been subpoenaed. Both say they are cooperating fully with Spitzer's investigation.
If he eventually brings charges against health insurers, Spitzer will have reached his original goal: Before he hit upon the rich vein of alleged wrongdoing at Marsh, his aim was to target insurers that rip off the little guy. Along the way, he has managed to plant fear -- and possibly the seeds of reform -- in an entire industry.
By Emily Thornton in New York