Monday, March 23, 2009

AIG's Rivals Blame Bailout For Tilting Insurance Game

By C. Brown

The federal bailout of insurance giant American International Group Inc., designed to help stabilize financial markets, is roiling another corner of the corporate world.
AIG's competitors claim the insurer's federal lifeline is unfairly tilting the commercial-insurance playing field. And they're pressing federal officials to crack down.

In a meeting March 4 at the St. Regis Hotel in Washington, some of AIG's biggest competitors complained directly to Federal Reserve Chairman Ben Bernanke, AIG's top government overseer. They urged him to prevent AIG from using the government rescue to win an advantage, particularly by cutting prices. Mr. Bernanke said he'd look into the complaints, according to people familiar with the meeting.
In the six months since the government stepped in, AIG at times has slashed insurance prices -- by more than 30% in some cases -- to fend off rivals and to keep or win contracts, according to public documents, insurance buyers, executives and others in the industry. This tack has helped AIG insure customers ranging from the U.S. Olympic Committee and an Arizona airport to an Illinois nursing home and a Florida town government.
State insurance regulators in New York and Pennsylvania are investigating, as is the Government Accountability Office, which issued a preliminary report at last week's congressional hearing on the AIG bailout. The GAO said insurance regulators, brokers and buyers say AIG "may be pricing somewhat more aggressively than in the past in order to retain business," but the pricing didn't appear "inadequate." The GAO said it hadn't "drawn any final conclusions."

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