Cingular Sues Insurance Companies and Brokers For Fraud

Cingular Wireless LLC has filed suit against insurance companies and brokers, alleging that the insurers paid over $1 billion in [tag]kickbacks[/tag] to the brokers if sent business their way. The lawsuit names brokers Marsh & McLennan and Aon Corp, and insurers American International Group Inc. (AIG), Aetna Inc., Cigna Corp., The Hartford Financial Services Group Inc., and The St. Paul Travelers Companies Inc.

Marsh has offered $850 million and AIG has offered $1.6 billion to settle similar claims brought by New York Attorney General Eliot Spitzer in October 2004. Cingular declined to participate in that settlement in order to pursue its own case.

Cingular claims that the kickbacks to Marsh increased the company’s earnings by $800 million just in 2003. As a result, it is alleged that customers purchasing insurance paid more than they should have for their coverage.

Cingular is also alleging that [tag]bid-rigging[/tag] occurred. When Cingular asked its broker to shop around for better insurance prices, the broker would obtain inflated quotes from two companies and claim that Cingular was already getting a good deal on insurance rates. This would induce Cingular to stick with its current insurance company, who was allegedly working behind the scenes with the broker to keep the business.