Florida Official Says Met Life to Refund $76 Million in Sales Abuse Case : Insurance: More than 2,500 of the 57,000 policyholders affected are from California. Company disputes the findings.

Metropolitan Life Insurance Co. has tentatively agreed to offer refunds totaling $76 million to more than 57,000 policyholders nationwide to settle charges of widespread sales abuse by its agents, the author of a Florida investigative report said Sunday.

Thomas Tew, special counsel to the Florida Department of Insurance and the Florida attorney general, said there is a “reasonable likelihood” that the policyholders were sold “whole-life insurance policies disguised as pension savings plans.” He said 2,649 of the policyholders are Californians.

Tew and members of a 17-state task force are also seeking up to $20 million in fines from Met Life. If the insurer agrees to that amount, California’s share could reach $1 million, said Rick Baum, California’s chief deputy insurance commissioner.

Met Life disputed the findings of the report, saying that it does not condone any sales abuse.

“We made a series of efforts over a period of time to enforce company policy,” said Met Life spokesman Charles Sahner. “They weren’t as effective as we would have wished.”

Tew’s report, which capped a five-month investigation, faulted Met Life’s top management for “tacit approval” of questionable sales tactics and failure to act on numerous indications of sales abuses. Headquartered in New York, Met Life is the nation’s second-largest insurance company, with assets of more than $118 billion.

The abuses, such as the use of sales literature that touted a retirement plan without identifying life insurance as the product for sale, occurred in virtually every area of the country and involved 950 Met Life sales offices, said the report by Tew, a Miami attorney.

The report specifically cited Met Life’s Executive Vice President Robert Crimmins, who heads the company’s 13,000-agent sales force, and the legal department, which is responsible for reviewing sales materials.

These executives failed to halt millions of misleading sales letters sent by the company’s Tampa, Fla., office under the supervision of Daniel (Rick) Urso, the report said.

“Met’s management style (is) that of ignoring the problem in the hope that it will disappear, like an ostrich burying its head in the sand,” said the 57-page report.

Baum said it is believed that many of the California policyholders purchased the insurance through the mail from offices in Florida.

Said Florida Insurance Commissioner Tom Gallagher:

“The company executives and management chose not to correct this situation out of ignorance, incompetence or greed.” Gallagher heads the 17-state task force that has been looking into Met Life’s sales practices.

Tew’s report said Met Life’s tactics not only violated many states’ laws, but caused financial hardship to as many as 57,272 policyholders who thought they were accruing more cash than they actually did. These policyholders paid premiums of more than $76 million through December, the report said.

The investigation covered a period of nearly five years, ending in October, 1993.

Tew said the settlement calls for Met Life to either provide refunds to policyholders who request them or to offer policyholders a new annuity. Policyholders may also decide to keep their policies, Tew said.

The proposed $20-million fine would be split by 47 states. Three states--Pennsylvania, Massachusetts and Georgia--have already imposed fines totaling $2 million against Met Life for sales abuses.

“We are supporting the effort of the settlement and want to ensure that policyholders are appropriately protected and there are penalties for outrageous behavior,” said Baum, the California insurance regulator.

However, Met Life’s Sahner has said the company would likely reject any fine that large and would consider scrapping the comprehensive settlement framework and reverting to state-by-state solutions.

He said the company has already dismissed seven mid-level executives in December for failure to halt improper sales practices in the Tampa office.

Met Life’s legal department, meanwhile, was plagued by “confusion, uncertainty and ineffectiveness” in its dealings with Urso, Tew’s study said. The company had only three headquarters lawyers working part-time to review sales literature used by 13,000 life-insurance agents, the report said.