Under the settlement announced Tuesday, December 12, group life insurer Prudential Insurance Co. of America will cease paying contingent commissions to brokers on group insurance products, including disability, life and long-term care.
Prudential also agreed to provide full disclosure of broker compensation to employers and said it would pay restitution of $16.5 million to policyholders and pay civil penalties totaling $2.5 million.
The settlement ends regulatory probes into Prudential’s broker compensation practices launched by Spitzer in 2004.
The investigations found that between 1999 and 2005, the company paid almost $60 million in overrides to brokers on nearly $18 billion in insurance premiums, Spitzer’s office said.
Additionally, Prudential at times paid some brokers specific commissions—so-called "single case overrides"—to close a deal or promote future business.
"On certain occasions Prudential built the cost of these single case overrides into the premiums," Spitzer’s office said in a statement.
Among the companies Prudential maintained override agreements with are: Aon Corp.; Marsh & McLennan Cos.; Universal Life Resources and Pacific Resources; and USI Holdings Corp., Spitzer said.
In a statement, Newark, New Jersey-based Prudential said, "This settlement resolves the investigation and is in the best interest of Prudential and its policyholders."