American Bankers Insurance Group (ABIG) will have to pay a $3 million fine that had been on hold as part of a consent order dating back to 1998.

According to the National Association of Insurance Commissioners, 43 states and Washington, D.C., banded together to conduct a market conduct examination of ABIG in 1998. At that time, ABIG was licensed to sell insurance in 50 states. The company's largest offering, among a variety of products, is credit insurance.

After multistate discussions about ABIG's compliance with individual state insurance laws, an investigation of the company's business practices unearthed violations including marketing and sales violations, the use of unlicensed insurance agents, and improper claims handling. The company was accused in several states, including Minnesota and Tennessee, of selling insurance policies not approved by the states, meaning policyholders may not get what they were paying for.

Jim Sykes, spokesperson for American Bankers, said the company has "always cooperated in the review." He says that between the time of the original sanctions and the time of the on-site review, American Bankers was working on both a compliance plan and providing the NAIC and departments of insurance the information they requested.

American Bankers signed a consent order in 1998 for all 43 states promising to:

• Pay states an initial monetary sanction of $12 million.

• Submit to an on-site market conduct examination and pay an additional $3 million in sanctions if the company failed the review.

• Audit all transactions between May 27 and Nov. 23, 1998, and pay any appropriate refunds or additional claim payments identified.

• Draw up and follow a compliance plan.

• File monthly reports to each state on the progress of the compliance plan.

In August 1999, ABIG was purchased by Fortis, an international insurance, banking, and investment company. ABIG was merged with the American Security Group to form a credit-related insurance company renamed Assurant Group. Fortis says it assumed outstanding debt of ABIG, although it was unclear if that included ABIG's sanctions.

As a result of the most recent on-site market examinations completed in 2000, ABIG will be required to pay the additional $3 million in sanctions it agreed to when it signed the consent order. The market conduct examinations were led by NAIC Secretary-Treasurer and Illinois Insurance Director Nat Shapo and Maryland Insurance Commissioner Steve Larsen.

Sykes says the company "fully expected to pay [the fine] regardless." While the company has awaited the final copy of the consent order, which Sykes says ABIG only received May 13, it has moved ahead with implementation of the compliance plan and expects to complete implementation in June 2002.

"It takes time to develop and then implement new processes and procedures," says Sykes. "But we have new company leadership and have a new approach to business, both because of that leadership" and because of the changes that have come about due to the formation of the Assurant Group under Fortis. Sykes says the company has addressed all concerns in the original review and complied "completely" with the original consent order.

The Maryland Insurance Administration says it feels ABIG has worked to resolve its issues and plans to give the company time to effect changes before it plans another on-site review.