The settlement also includes Attorneys General Richard Blumenthal of Connecticut and Lisa Madigan of Illinois.

Under the settlement, Chubb paid $15 million to policyholders and an additional $2 million in costs and to make reforms. The company also agreed to end the payment of contingent commissions. It said it would adopt a new supplemental compensation program aimed at rewarding agents for their efforts.

"It is well known that we strongly disagree with the actions of regulators and attorneys general to ban payment to agents of any legal form of compensation," said Robert A. Rusbuldt, chief executive officer of the Alexandria, Va.-based association.

Mr. Rusbuldt in a statement said, "Incentive compensation is a perfectly legal way to compensate salespeople in virtually all industries across America, and to eliminate the right of any business to determine how to lawfully reward its sales force punishes an entire industry for the improper actions of a few.

"However, Chubb has provided a clear plan about how it will compensate agents and brokers in the future, and we commend Chubb for providing this information and letting agents know what the future holds for them," he added.

IIABA President Alex Soto said Chubb's announcement explaining the parameters of its plan for the future to reward sales excellence via a "Guaranteed Supplemental Compensation" program "provides some certainty in an evolving and unpredictable business environment, and agents value this type of communication about what the future holds for them."

The association said it would continue to defend and support incentive compensation as a legal, legitimate form of compensation that is employed in all sales-based industries.

"Any compensation system can be abused, but the problem lies with those few who abuse it, not the system itself," the association said.

Debra Perkins, IIABA executive vice president and general counsel, added that while those who abused the system should be punished, "state attorneys general should not be determining through settlement agreements business practices for companies that are already complying with the law."

Donald Light, senior analyst with Celent, a Boston-based financial and research firm, noted that the big national insurance brokers, "some but not all of whom got caught with their hands deeply in the cookie jar" by Mr. Spitzer's investigation into broker price-fixing and steering, agreed to stop receiving contingent commissions.

Mr. Light said "several major insurers, with varying degrees of responsibility for helping put the brokers' hands into the cookie jar, had agreed to stop paying contingent commissions on some products. Chubb's agreement leaps beyond these precedents."

The analyst commented, "Oddly enough, contingent commissions are legal and a longtime accepted industry practice. And, oddly enough, state insurance commissioners, who are the legal regulators of the insurance industry, have never tried to ban contingent commissions across the board. So it is a very merry holiday for some attorneys general, an okay holiday for Chubb, and a lump-of-coal-ish holiday for the many brokers and agents who had been receiving these commissions."