Data & Research January 29, 2008

Money Brings Peace of Mind, But Worries Too

High net worth individuals are primarily concerned about the safety of their family, but they also have significant concerns about the protection of financial assets such as stocks, bonds, real estate, and other investments.
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Those with $2-$5 million in investible assets and the “newly affluent’ – individuals who achieved their wealth in the last five years – are the most concerned, according to a recent survey of Americans with investment assets in excess of $1 million commissioned by Fireman’s Fund Insurance Company and conducted by Opinion Research Corporation (ORC).

Although most Americans with upwards of $125,000 in discretionary income believe money has brought them considerable security and peace of mind, they don’t “really feel like they have a lot of money,’ and agree with the sentiment that having been “burned in business experiences has made me much more cautious,’ according to the 2007 Annual Survey of Affluence and Wealth in America, produced by American Express Publishing and Harrison Group.

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When asked if they worry that someday they could run out of money, 49% of those who have been affluent for less than six years and 52% with $125K-$249K in disposable income indicated concerns about financial security in the American Express poll.

Compliance January 29, 2008

AIG Settles Producer Compensation Investigation for $12.5M

American International Group, Inc. (AIG) has reached settlements with nine states and the District of Columbia relating to industry-wide investigations into producer compensation and insurance placement practices.
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The settlements call for total payments of $12.5 million, to be allocated among the ten jurisdictions, an announcement said. AIG said it will continue to maintain certain producer compensation disclosure and ongoing compliance initiatives.

AIG denied the allegations and did not admit liability, but said it agreed to the settlements to avoid the expense and uncertainty of protracted litigation. AIG also said it will continue to cooperate with the industry-wide investigations.

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The settlements, subject to court approvals, were reached with the Attorneys General of the States of Florida, Hawaii, Maryland, Michigan, Oregon, Texas, and West Virginia; the Commonwealths of Massachusetts and Pennsylvania; the District of Columbia; the Florida Department of Financial Services; and the Florida Office of Insurance Regulation. The agreement with the Texas Attorney General also settles allegations of anticompetitive conduct relating to AIG’s relationship with Allied World Assurance Company, and includes an additional settlement payment of $500,000, according to the announcement.

AIG is not the only insurance firm accused of paying contingent commissions to brokers who brought in more business.

In January 2007, Connecticut Attorney General Richard Blumenthal announced that The St. Paul Travelers Companies, Inc. said it would stop paying contingent commissions to insurance agents and brokers by the start of 2008 (See St. Paul to Convert to Fixed Commission Structure). The decision echoed one announced by Chubb Corporation in late 2006 (See Chubb to Discontinue Contingent Commissions).

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