AIG Unit to Pay $13.9 Million in New York Coverage Settlement

An American International Group Inc. unit agreed to pay $13.9 million to resolve claims that it issued insurance policies to schools, universities, and companies that didn’t meet minimum loss-ratio standards or provide coverage as advertised.

National Union Fire Insurance Company of Pittsburgh has issued blanket health and accident insurance policies for colleges and universities, day camps and child care providers, K-12 schools, and common carriers such as transportation companies across New York state. New York’s Department of Financial Services alleges the AIG subsidiary overcharged policyholder premiums by nearly $8.4 million from 2016 to 2021 and didn’t provide appropriate coverage for intercollegiate athletics, according to a settlement announced Tuesday.

“NUFIC’s failure to address significant issues with these policies caused schools and childcare organizations to overpay for insurance,” New York Superintendent of Financial Services Adrienne Harris said in a statement.

AIG declined to comment.

NUFIC maintained loss ratios averaging around 46.8% for blanket accident and health insurance policies in the relevant period, far below the typical 65% required under New York insurance law, according to the consent order.

In addition, the insurer provided coverage for intercollegiate athletic injuries on an indemnity basis rather than for diagnosing and treating injuries, according to the settlement.

New York insurance regulators say NUFIC didn’t take steps to fix problems when supervisors brought them to the company’s attention.

The insurer agreed to return $8.3 million to policyholders and pay more than $5.6 million in penalties to the DFS under the settlement.