April 26, 2005 by Canadian Underwriter
AIG will be audited for “years of alleged improper booking” of workers’ compensation premiums, New York Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills announced Tuesday.
Authorities say a consultant will be appointed by the insurance department to look into the booking of workers’ compensation premiums as general liability premiums, a practice the company has discontinued already. “The conduct appears to have taken place for over a decade, and continued even after AIG insiders repeatedly challenged its legality,” the joint statement by Spitzer and Mills notes.
The alleged practice would have allowed the insurer to avoid paying higher amounts into workers’ compensation funds, with authorities charging that one document “dating from the early 1990s” estimates the company benefited by tens of millions of dollars annually as a result.
Authorities say a 1992 internal legal memorandum informed top management the practice was illegal, but they are unclear on when the practice was discontinued.