NEW YORK (Bloomberg) — American International Group Inc., the world's largest insurer by assets, agreed to pay $12.5 million to Florida and eight other states to end an investigation into bid-rigging allegations.

AIG units paid brokers including Marsh & McLennan Cos. to win business without the knowledge of clients, Florida Attorney General Bill McCollum said yesterday in a statement. AIG denied the allegations and settled to "avoid the expense and uncertainty of protracted litigation", the New York-based insurer said in a separate statement.

"Governments and businesses paid inflated insurance rates because they were led to believe there was competition when there wasn't," Alex Sink, chief financial officer of Florida, said in the statement.

AIG will give customers more disclosure about fees it pays brokers, according to both statements. About $3 million of the accord will go to Florida to fund a reimbursement pool. The settlement is subject to court approval.

The insurer agreed separately in 2006 to pay $1.64 billion to end state and federal probes into accounting and sales practices, including bid-rigging accusations.

AIG rose $1.98, or 3.6 percent, to $56.73 in New York Stock Exchange composite trading at 5.06 p.m. Bermuda time. The company has declined 17 percent in the past year.

Marsh & McLennan, Aon Corp. and Willis Group Holdings Ltd., the world's three biggest insurance brokers, banned so-called contingent commissions in 2004, giving up more than $1 billion in annual revenue to settle conflict-of-interest probes by Eliot Spitzer, then New York's attorney general.

In addition to Florida, states participating in the latest AIG settlement are Hawaii, Maryland, Massachusetts, Michigan, Oregon, Texas, West Virginia and Pennsylvania. Washington, D.C., also participated.