NEW YORK (Reuters) ? Insurance company Chubb Corp. said yesterday it will pay $17 million to settle allegations from attorneys general in three states that it paid secret commissions to win business.

Connecticut Attorney General Richard Blumenthal said Chubb will adopt sweeping business reforms to settle allegations levelled by him and his counterparts in New York and Illinois.

"Chubb is the first insurer to agree to a comprehensive ban on contingent commissions ? a major milestone in the pursuit to end a pay-to-play culture in the insurance industry," Blumenthal said in a statement.

Previous settlements now prohibit AIG , Zurich American Insurance, ACE Ltd. and St. Paul Travelers Company from paying contingent commissions in specific lines of insurance.

Chubb said the settlement resolves all issues arising out of investigations into pricing practices in the property-casualty insurance market. Investigations by New York, Connecticut and Illinois officials concluded that Chubb did not participate in illegal bid rigging, the company said.

"Chubb acknowledged that it appears to have unknowingly benefited from the bid-rigging activities of others in the excess casualty market, which may have provided Chubb with an advantage in retaining certain renewal business," the company said.

Chubb agreed to contribute $15 million to a settlement fund established for the benefit of these customers. Chubb has also agreed to pay $2 million to help defray the costs of the investigations by the attorneys general.

Blumenthal said the settlement reflects that since at least the mid-1990s, Chubb and other insurers have paid hundreds of millions of dollars in undisclosed contingent commissions to the world's largest insurance brokers and agents.

In exchange, the brokers and agents steered new business to Chubb. The cost of these agreements were loaded into customers' premiums, inflating insurance costs, Blumenthal said.

He said in one scheme Chubb created a reinsurance company in Bermuda and solicited agents and brokers to become part owners. The agents and brokers steered policies to Chubb, which in turn paid the Bermuda-based company a fee to reinsure a portion of the claims generated by the steered policies.

Influenced by their financial interest in the Bermuda company, brokers and agents steered about $100 million in premiums to Chubb, Blumenthal said. Under the settlement, Chubb is banned from creating a similar entity in the future, he said.