Oklahoma Insurance Commissioner levies $400,000 fine against 11 AIG

Journal Record, The (Oklahoma City), Mar 21, 2007 by Marie Price

Oklahoma Insurance Commissioner Kim Holland announced Tuesday that a $400,000 civil penalty has been levied against 11 American International Group workers' compensation insurance companies, the largest such fine in state history.

Agency communications director Marc Young said the AIG companies have already agreed to and paid the fine under a consent order with the insurance department.

Young said there were discrepancies in how the companies reported loss costs.

He said this information is used by the National Council on Compensation Insurance or NCCI to generate ratios for occupational codes by which premium rates are determined for insurance companies.

Holland said accurate information is essential to correctly price insurance and to protect consumers.

"It is possible these reporting discrepancies resulted in Oklahoma consumers paying too much for workers' compensation insurance," she said. "It is also possible that this resulted in consumers paying artificially lower rates that did not provide an accurate picture of a company's financial solvency."

Insurance agency officials also said financial data calls to AIG from 1998 through 2003 for Oklahoma showed numerous discrepancies, including a more than $13 million disparity in premiums reported during that time period.

Holland said NCCI was unable to use the companies' financial data in developing 2005 loss costs due to late filing and data-quality issues.

NCCI is a national workers' compensation rating organization.

Holland said the irregularities affected the rates of all workers' compensation insurance companies doing business in Oklahoma, because rates are calculated based on aggregated data collected from all such companies.

The companies affected by the consent order include American International Pacific Insurance Co., Illinois National Insurance Co., National Union Fire Insurance Co. of Pittsburg PA, New Hampshire Insurance Co., Granite State Insurance Co., American Home Assurance Co., Insurance Company of the State of Pennsylvania, Birmingham Fire Insurance Co. of Pennsylvania, AIU Insurance Co., Commerce and Industry Insurance Co. and American International South Insurance Co.

According to the consent order, in 2005 Commerce and Industry Insurance Co. wrote 13.56 of workers' compensation premiums in Oklahoma, with American Home Assurance Co., writing more than 5 percent. These figures exclude the portion of the market written by CompSource, a state-created workers' compensation insurer.

Young said the situation is not unique to Oklahoma.

In January 2006, the Florida office of Insurance Regulation issued a consent order to 10 AIG companies for similar reasons.

Those companies agreed to a $500,000 fine.

The consent order also points out that with the exception of a large-risk rating plan, the companies subsequently corrected all financial data call issues with NCCI and are working with the rating organization to correct the former.

Joe Norton, AIG public relations director, said the consent order refers to errors in data submitted for calendar years 1998-2004.

Norton said AIG has since completed the first phase of a data- remediation plan now in place in all NCCI states.

Under the plan, he said, AIG submitted 1999-2005 data, which was included in the 2006 loss-cost filing.

"We continue to work with NCCI and the Oklahoma department to fully comply with current and future data calls," he said.