AIG to pay $35mn penalty to avoid legal entanglements

American International Group agreed to pay a $35 million penalty in order to resolve a probe into its unlicensed insurance sales.

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A New York State probe from the Department of Financial Services has ended with an insurer’s agreement to pay a $35 million penalty.

American International Group accepted the penalty in order to resolve the DFS’ issues with unlicensed insurance sales by former company units American Life Insurance Co. and Delaware American Life Insurance Co.
DFS Superintended Benjamin Lawsky also said AIG made misrepresentations to the state.

“No company has a right to ignore the laws that ever other insurer has to follow,” Lawsky said this week. “This type of misconduct is unfair to competitors and puts consumers at risk. We are pleased that AIG has decided to resolve this matter.”

AIG originally sued the DFS to block Lawsky from fining the company over activities by their former units. With the settlement, AIG also agreed to dismiss its suit. Company spokesman Jon Diat attributed the decision to a desire to “avoid the distraction and expense of ongoing litigation,” according to a Bloomberg report.

American Life and Delaware American Life were sold to MetLife Inc. in 2010 for more than $16 billion. MetLife agreed to pay $60 million to the DFS in March after the group found out the two businesses sold insurance in New York without a license. MetLife also agreed to cooperate in the DFS investigation of AIG.

For its part, MetLife consented to pay DFS $50 million to settle the issue and other $10 million to the Manhattan District Attorney’s office.
 

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