TENNESSEE SAYS AIG IS OVER-CHARGING FOR TERRORISM COVER

New York-based AIG is gouging customers in several states for terrorism cover in its workers’ compensation policies, according to Tennessee commerce and insurance commissioner Paula Flowers. In an interview with Associated Press , Ms Flowers said that AIG collected $40m in terrorism surcharges in 2003, a figure she said was more than triple the proper rate. The issue came to a head last week after local insurance agent Jack Spann told state regulators and lawmakers in an email that AIG was charging the higher rates as “merely a way to pad the premium and blame it on [September 11]”. Under federal law passed in the wake of September 11, insurers are allowed to offer terrorism cover as a rider to certain commercial policies. AIG is basing its terrorism surcharge on 3% for every $100 of client payroll compared to a 2% guideline set out by the National Council on Compensation Insurance, Mr Spann said. Texas and Arkansas have already denied AIG rate increases this year, and Florida is in court with AIG over the issue.