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How Many Workers’ Comp Insurers Were Lying to Regulators?

American Insurance Group (AIG), the company who was accused by then-governor Eliot Spitzer in 2006 of underreporting premiums for the purposes of funding the New York Workers' Compensation Reinsurance Pool, is now accusing other companies of doing the same thing.

In a third-party complaint filed last week, AIG accused Liberty Mutual, The Hartford Financial Services Group, adn a dozen other insurance companies of dumping the shared costs of the pool on AIG and suppressing probes into their own business practices.

The dispute here is ultimately over who gets to foot the bill for the underfunded state reinsurance pool.  New York established the reinsurance pool to serve as a payor of last resort for workers' compensation claims in the case that an insurance company went bankrupt.  As a trade-off for the privilege of doing business in New York, each insurance company is required to submit payment into the reinsurance pool in proportion to their share of the New York workers' compensation market.  So, if a company was writing 11% of the workers' compensation contracts, they would be responsible for 11% of the pool.

However, companies soon realized that if they could underrepresent the amount of money that they were making from the New York, they would be able to save money off of their share of the reinsurance pool.

AIG was busted back in 2006 and was to pay over $300 million in unpaid costs and is now trying to shift the blame away from themselves and onto the other workers' compensation insurance companies.  Insurance companies will do anything to make more money, even if it involves lying to state regulators.