Has AIG Learned Anything?
Even as it becomes apparent that a massive three-year injection of public sector dollars will probably allow onetime financial giant AIG to continue operations, still more evidence of the companies’ sleazy, cutthroat business strategies has begun to come out.
Earlier today, AIG announced that it would pay a mindboggling $146.5 million fine to settle claims that it cheated state-run funds that serve as “residual” (last resort) insurers for workers injured on the job. The settlement, many analysts believe may well presage an even larger settlement (or defeat in court) over a related billion dollar case that dozens of other insurers have filed against the company.
While AIG has not actually admitted wrongdoing, its willingness to pay a huge fine indicates that, at minimum, the government had some stuff that the company didn’t want argued in court. As I’ve written about before, AIG became huge and profitable by building a structure designed to dodge regulatory scrutiny (that’s how it avoided attention), pursue an investment strategy far riskier than that usually allowed to insurers (that’s what did it in), and doing everything it could to avoid taking responsibility for paying claims.
The company tried to void auto repair warrantees for people who attached trailer hitches to their cars, illegally tried to terminate expensive workers’ comp claims, and tried to welch on claims against “completion bond” policies it wrote for Hollywood studios. The workers’ comp settlement adds another major piece of evidence that the company operated in a fast and loose fashion. Whatever the desirability of cutthroat business practices in the private sector, they’re not what one should expect from a company that’s a ward of the state.
And there’s no evidence that AIG has changed. Competitors encourage the government-owned company of undercutting them, and consumer satisfaction with many of its products remains extremely low.
AIG, quite simply, was and, by most appearances, continues to be, a bad apple. The policies that have helped it survive won’t help the economy and, by apparently condoning the companies’ business practices, may make things worse. AIG probably won’t die. But the latest settlement shows that it should.