New York Attorney General Eliot Spitzer's probe into whether insurance companies paid retirement plans to offer their investments is expected to lead to lawsuits and settlements in the next several months, a source familiar with the situation said on Thursday.

State investigators are looking into how the managers of pension plans choose products such as mutual funds and annuities, which are available to plan members.

In some cases, consumers pay high fees that eat into their investments or are forced to choose from funds that generate high fees for retirement plan managers, the source said.

There is a good reason why consumers have to choose from these higher cost funds, the source said. It's because they're (the funds are) paying money to be on the menu.

A spokesman for Spitzer, Darren Dopp, declined to comment on the status or targets of the probe, saying only that investigators were making good progress.

With a month's investigation under our belts, we're more confident we're on to something that will lead to additional suits or settlements, Dopp told Reuters, and that we can provide a service helping consumers in an industry that hasn't had a lot of scrutiny in the past.

Many of the largest life and property insurers, including MetLife Inc., AXA Financial, Lincoln National Corp. and American International Group Inc., also sell annuities and retirement plans.

The person familiar with the probe would not identify target companies.

Spitzer's investigation of the insurance industry came to light in May when Hartford Financial Services Group Inc. and ING Group said they were the targets of lawsuits brought by Spitzer.

Spitzer's office began its probe of retirement products last year after receiving tips that insurers secretly paid brokers to recommend their annuities to pension plans. Hartford in May announced it would pay $20 million to settle complaints by New York and Connecticut regulators.

A day earlier, Dutch financial services group ING said it was under investigation for the fees it paid a New York teacher's union, New York State United Teachers, to endorse ING's insurance and retirement products to union members.

Spitzer, who has brought high-profile lawsuits against brokerages, mutual fund firms and insurers, seeks election as New York governor in November.

The earlier cases centered on how middlemen recommended inferior products or shortchanged small investors in exchange for hidden payments and resulted in billions of dollars in penalties and restitution.

Steve Weisbart, an economist for the Insurance Information Institute, said he did not believe the abuses were widespread in the industry. He said Spitzer's office has incentive to make the biggest splash it can with whatever evidence it has.

But Weisbart acknowledged insurers are under pressure to attract assets.

It's a very, very competitive world, he said. Every major insurance company is going after assets in a big way.