Prudential Insurance Co. will pay $19 million in restitution and penalties to settle an investigation of payments made to brokers to steer business its way, New York Atty. Gen. Eliot Spitzer's office said Tuesday.
The settlement came as part of a multiyear investigation of bid rigging and price fixing in the insurance industry. Spitzer has contended that "contingent commissions" paid to brokers and agents to steer business to insurance companies are the equivalent of kickbacks that unfairly increase the prices paid by insurance clients.
Under the agreement, Prudential Insurance, a unit of Newark, N.J.-based Prudential Financial Inc., will end the payments on group insurance products -- including life, disability and long-term care -- and will disclose broker compensation to employers shopping for insurance.
The company will pay $16.5 million in restitution to clients and penalties of $2.5 million.
Prudential said it cooperated with Spitzer's investigation and voluntarily established procedures to disclose contingent commissions going back to January 2004, spokesman Bob DeFillippo said.
Investigators said that from 1999 to 2005, Prudential paid about $60 million in contingent fees to brokers for about $18 billion in insurance premium business.
In a separate action Tuesday, Spitzer sued UBS, alleging that Europe's largest bank defrauded thousands of brokerage clients out of tens of millions of dollars by steering them into costly accounts they didn't need.
Spitzer claimed that UBS Financial Services Inc., a unit of Zurich, Switzerland-based UBS, improperly shifted customers into accounts that charge fees based on assets under management rather than commissions, according to a complaint filed in New York state court. UBS denied the allegations and said the InsightOne accounts made up fewer than 3.5% of its U.S. brokerage accounts.