AIG: Unfair Rates and Subsidized Bonuses
Taxpayers, Customers, and Commissions-Only Paid Agents Ripped Off
Mar 22, 2009
One's ability to pay the bills on time and have good credit depends on having enough income. If you don't have an adequate income on which to live and pay your basic utility bills on time, your credit will be poor. And if your credit is poor, you're penalized with higher rates on your auto insurance even if you've never had an accident or filed a claim.
Rates Tied To Income And Occupation More Than Driving Record
Many insurers also use educational level and occupational class as an additional factor in the rate tiering scheme. Those who could afford advanced college educations as the ticket to prestigious professions pay less for car insurance than low-income people, regardless of driving record. This penalizes the poor because those who are least able to afford higher rates are the ones forced to pay more — with far less income than society's winners.
Credit-scoring also rewards those likely to cause claims in the first place: bad drivers who have good jobs and good credit.
Chi Chi Wu of the National Consumer Law Center criticized the insurance industry's use of credit-scoring, saying, "Many people have poor credit because of divorce, job loss, or serious illness. They're people who have fallen on hard times." She also noted that credit reports are notorious for errors.
As a result, high-flying executives and CEO's at AIG and other insurers got rich from profits skimmed off the backs of their poorest customers.
Independent Insurance Agents Forced to Eat Corporate Costs
Customers in a troubled economy are not the only ones that got raped by high-flying AIG executives. The global behemoth also passed off most of its cost of doing business onto their agents.
AIG charges their agents for every motor vehicle report (MVR) and claims history record (CLUE) that agents must pull in order to verify quotes and write new policies for new customers, if the verified quote does not result in a sale. But the quote may change after the CLUE and MVR comes back with any incidents. As a result, the potential customer doesn't buy the policy and goes elsewhere and the agent must pay the insurance company the fee for the MVR and the CLUE reports.
Agents are not paid a base salary and receive no health or dental benefits. They're paid commissions-only. When customers let policies cancel or lapse for nonpayment of premiums, agents are back-charged their hard-earned commissions by the company. Agents are also responsible for paying for their own office equipment, utilities, and office space. And it is the agent who bears the brunt of irate customers.
AIG made out like a bandit from discriminatory rate tiering that unfairly soaks the poor and unfair paltry compensation paid to sales workers. But AIG foundered due to executive greed, requiring a $170 billion dollar taxpayer bailout.
Senator Chuck Grassley to AIG Execs: 'Resign or Kill Yourselves'
The wealthiest, most powerful executives of AIG got rewarded with $165 million in bonuses after bringing the global property and casualty giant to its knees. The season is ripe for lynch mob justice.
According to New York Attorney General Andrew Cuomo, AIG paid over a million dollars in bonuses to 73 AIG employees. Cuomo said, "...last week, AIG made more than 73 millionaires in the unit which lost so much money that brought the firm to its knees, forcing a taxpayer bailout. Something is deeply wrong with this outcome."
Senator Chuck Grassley (R-IA) was less polite, saying AIG executives should follow Japanese tradition and "...come before the American people, take that deep bow and say, 'I'm sorry', then either resign or go commit suicide."
