AIG Musings

AIG is in the news today again, as Joseph Cassano (former head of the Financial Products Division) testified in Washington that he believes the disastrous derivatives trades that destroyed the company would have ultimately worked out just fine, if only the U.S. had not unwound them so quickly when the Feds had to rescue AIG. I dunno, that does seem to ignore the fundamental point that, if those trades were all so hunky-dory, why exactly did the government have to invest $80 billion or so in loose change to keep the company from going under?

But AIG is (once again) on my radar screen today for another reason as well. I just received a phone call and email from a former policyholder of AIG's who wanted to alert me to another instance (so he says, anyway) of AIG playing fast and loose with the rules.

This former AIG policyholder says that AIG failed to apply the maximum payroll caps that applied on payroll his company paid to New York workers. It was only when he independently learned of these payroll caps from another employer that he was able to get AIG to correct the audits and return the premium overcharges.

Now, it seems to me that knowing what the particular payroll maximums are in a given state is something that premium auditors at AIG should have known about. It was certainly their responsibility to know about that. But beyond the overcharges that happened to this individual employer, he raised an important point to me: how many other New York employers were overcharged by AIG in this manner?

This is a question I cannot answer at present, but I would certainly encourage all New York employers with highly paid individual employees to look into this issue.