MetLife settles fed probe with $13.5 million payment

MetLife Inc., the biggest U.S. life insurer, agreed to pay the government $13.5 million to resolve an investigation into "improper" payments to a San Diego-based broker that sold the company's coverage.

Locally, MetLife has operations in Aurora and Downers Grove.

"MetLife made millions of dollars in improper payments to obtain the business of the brokerage firm's clients," the Department of Justice said in a statement yesterday. "These hidden fees were, in turn, generally included in the rates charged by MetLife" to the insurance customer.

MetLife failed to report the payments as required by the Employee Retirement Income Security Act, said Karen Hewitt, U.S. Attorney for the Southern District of California, in the statement. The payments, known as contingent commissions, helped the insurer bid for business with "major corporate clients," the department said. The insurance broker wasn't named.

"Contingent commissions are bad for consumers," said Birny Birnbaum, executive director of the Center for Economic Justice, a consumer group. "It creates incentives for agents to steer consumers into products that aren't favorable to the consumer but are favorable to the agent."

MetLife cooperated in the probe and will continue to help government officials on any further investigations tied to the matter, the Department of Justice said.

"This settlement relates to contingent compensation and other payments made to a particular broker more than five years ago," Christopher Breslin, a spokesman for New York-based MetLife, said in an e-mailed statement. "We are pleased to put the matter behind us."

Spitzer Investigations

Contingent commissions, which insurers pay to entice brokers, vary in amount based on the quantity of coverage sold by the middleman and how profitable the policies turn out to be for carriers.

The payments were the object of investigations by Eliot Spitzer, the former New York attorney general, into the biggest brokers of property-casualty insurance in 2004 and 2005. His settlements with Marsh & McLennan Cos., Aon Corp. and Willis Group Holdings Plc totaled more than $1 billion.

MetLife cooperated with the Internal Revenue Service and the Federal Bureau of Investigation, the Justice Department said. The settlement takes into account MetLife's "substantial and continuing remedial efforts" and previous payments made by the insurer to its policyholders, the department said.

"Any effort by an insurance company to conceal the payment of improper fees or commissions will not be tolerated," Hewitt said in the statement.