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Monday January 03, 05:34
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AIG sells stake in brokerage venture with Nasdaq to avoid conflict of interest
(by John Glagow)
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AIG will divest of its stake in the brokerage concern it formed with the National Association of Security Dealers in 2000. The sale comes in the wake of the scandalous suits initiated by New York Attorney General Eliot Spitzer, causing a massive overhaul of the insurance industry, as AIG management has decided that the venture formed to sell policies to Nasdaq-listed companies may suffer from potential conflicts of interest.
Reports of brokers being pressurised into steering business towards AIG instead of choosing the best option for the client have surfaced from accounts of four employees, one of whom recalls AIG people were calling the office to ascertain their company got the contracts it wanted. However, none of the employees recall instances where the client paid more than he should have. Also, former brokers report that clients’ choice was limited as some competitors declined to submit their bids assuming that the brokerage favored AIG.
AIG and Nasdaq deny the allegations claiming the share of business that went to AIG from its brokerage concern was roughly equivalent to 40%, the average in the market. AIG’s Mr. Norton said: "There is no requirement for the Nasdaq agency to sell AIG company products."
The suit launched by Eliot Spitzer into the insurance industry practices is likely to lead to more transparency. To address some of the issues raised in the probe, Nasdaq issued a brochure that gives information of AIG’s ownership interest on its cover, says that the brokerage concern "will fully disclose all aspects of our services to our clients including all of our compensation, documentation of our marketing efforts including submissions, quotes and declinations, all intended to insure that our clients have a transparent view of Nasdaq Insurance’s brokerage procedures."
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