In an uproar former Securities and Exchange Commission Chairman Arthur Levitt calls “the scandal of the decade, without a question” the furor unfolding in the insurance industry is getting uglier by the day, with New York Attorney General Eliot Spitzer claiming to have found signs of improper business practices at Aon Corp., the New York Times reported.
In another development, Jeffrey W. Greenberg resigned as chief executive and chairman of embattled Marsh & McLennan
Cos. His replacement is Michael Cherkasky, newly named head of Marsh's insurance-brokerage unit, the Wall Street Journal reported.
Levitt, quoted in the Boston Herald, said the scandal brewing in the insurance industry “dwarfs anything we've seen thus far.”
Quoting an unnamed source close to the case, the Times reported that the investigators have discovered evidence of deceptive and coercive practices at Aon, and could bring a civil lawsuit against the company within two weeks.
In the last two weeks, the insurance industry has been rocked by allegations that major brokers have cheated customers by faking bids, fixing prices and steering business to favored insurance companies, the Times reported.
At Aon, investigators claim to have found what they are calling antitrust violations, but have thus far seen no sign of bid rigging or price fixing, the Times reported, quoting sources briefed on the case.
However, investigators did find evidence of “tying” at Aon, which is a practice that involves brokers threatening to curtail sales for an insurance company unless the insurer lets the broker also arrange its own coverage needs or reinsurance, the Times reported. Investigators are expected to file suit soon against several smaller national insurance brokers.
Spitzer filed suit Oct. 14 against the world's largest insurance broker, Marsh and McLennan Cos., accusing the company of rigging bids for corporate clients' insurance contracts. He all but called for Greenburg's ouster by refusing to negotiate with sitting management. Cherkasky, Greenburg's replacement, was once Spitzer's boss in the Manhattan District Attorney's office, the Journal reported.