2 Firms Named in Insurance Sales Probe : State Orders Companies to Hearing Into Deceptive Practices

The state Insurance Department has ordered one group to stop selling Medicare supplementary insurance in California and summoned that group and another to hearings on allegedly deceptive sales practices, Insurance Commissioner Roxani Gillespie said Friday.

The steps were announced four days after a national consumers’ group, the Consumers Union, filed a complaint charging 19 insurance companies or groups representing such firms with trying to sell extra health insurance to the elderly in California with a series of misleading mailings.

The group ordered to cease doing business in California was not on the Consumers Union complaint list, but the second group, summoned to a hearing, was on its list. Gillespie said a department task force had been working on the matter since Aug. 5.

Gillespie announced that the National Assn. of Retired Persons, headquartered in Dallas, was ordered to cease soliciting business in California after it was determined that it was not licensed to sell insurance here.

Caution Against Confusion

The insurance commissioner cautioned that the group is not to be confused with the better known and widely respected American Assn. of Retired Persons, headquartered in Long Beach.

She added that the National Assn. of Retired Persons and the California Assn. for Concerned Senior Citizens were ordered to departmental hearings at the end of this month on their sales practices. The second group has been identified as controlled by the Morelli Insurance Agency of San Jose.

Gillespie said of both groups: “They have been using mass mailings. The allegation is that they misrepresent the nature and purpose of their business, as well as the availability of benefits under the policies they sell.

“A hearing is part of the disciplinary process,” the insurance commissioner explained. “When we find that there is cause to maybe issue a cease-and-desist order against an organization, we hold a hearing to allow them to give their side of the story.”

However, in the case of the National Assn. of Retired Persons, since they do not have a license, an order to cease doing business in the state was issued immediately, she explained.

There was no answer Friday to telephone calls for comment made to the National Assn. of Retired Persons.

At the Morelli Insurance Agency, a secretary would say only that Frank Morelli, the agency’s proprietor, was out of town and would not be available to respond to questions until Oct. 15.

Gillespie said that her task force may soon summon other sellers of such insurance to hearings. She said one other agency, which she did not name, had been found to have sold one elderly person 43 different policies, and another person 17--far more than they needed.

“We know that some seniors are buying too much insurance,” she said. “They think if they buy a lot they will be covered when it is often the case that, if a person has one policy, other policies won’t pay, or won’t pay very much.”

The insurance commissioner said the task force has also found that some insurance agents are advising their clients to change policies too often. Each time there is a change, she noted, the agents collect new commissions.

Gillespie said the Insurance Department is preparing a buyer’s guide to caution the elderly on the pitfalls in buying supplementary insurance.