Mr Spitzer filed the lawsuit against Universal Life Resources in the New York State Supreme Court in Manhattan.

The attorney general, who has won fame by crusading against corporate shenanigans, has said he is investigating the insurance sector.

News that Mr Spitzer was filing another case battered US insurance stocks.

Mr Spitzer filed a lawsuit in October against the world’s biggest insurance broker, Marsh & McLennan.

This is about normal people paying too much for their health insurance Andy Barile, Fairbanks Consulting Group analyst

Since then, Marsh & McLennan has replaced its chairman and several senior executives. It is cutting 3,000 jobs, or 5% of its workforce, to offset an casualty exam insurance property fall in revenues as a result of the court battle.

Hidden payments

Mr Spitzer’s suit against ULR alleges the California-based firm received corrupt payments for steering its customers towards certain insurers. A lawyer for ULR said Mr Spitzer’s team had not contacted the firm about the lawsuit, the Associated Press reported.

TAKING AIM AT INSURERS How far will the ripples spread?

The filing named the insurers as MetLife, Prudential Financial, and disability insurance specialist Unum Provident. They have said they are co-operating with the inquiry. Shares in all three fell by more than 3% on Friday.

The lawsuit alleges that about two-thirds of ULR’s $25m (13.4m) revenues in 2003 came from hidden fees paid by insurers in return for steering clients towards them.

ULR specialises in employee health insurance and life cover.

Healthcare

In a statement, Mr Spitzer said his latest filing demonstrated that “the corrupt practices first laid bare in the Marsh suit are present in additional sectors of the industry”.

“Secret payoffs and conflicts of interest that infected the market for property and casualty insurance have taken root in the employee benefit market as well.”

Insurance analysts believe ULR’s focus on employee benefits could make the lawsuit politically sensitive, though ULR is a smaller firm than Marsh.

“This suit may have more far reaching effects than the previous one because the entire country is up in arms about the cost of health insurance,” said Fairbanks Consulting Group analyst Andy Barile.

“This is about normal people paying too much for their health insurance not about a huge casualty insurance universal
buying property coverage around the globe,” he added.

ULR received a similar lawsuit in October from a group of policyholders, United Policyholders, a non-profit casualty company insurance property traveler and has denied those allegations.