Insurer to Pay Record Settlement
A Minneapolis-based insurance company agreed to pay a record $5.1 million to settle charges that it misled consumers by selling them universal life insurance policies in the guise of retirement plans, the California Department of Insurance said Monday.
The payment by Allianz Life Insurance Co. of North America, a unit of German insurance giant Allianz, includes $2.3 million in restitution to about 1,800 people who bought the policies and later said they had been deceived.
The settlement also includes a $750,000 fine, a $250,000 reimbursement for the Department of Insurance’s investigative expenses and a $1.75-million investment in a program to finance business initiatives in underserved areas.
The department in September charged Allianz with numerous violations of the state insurance code in connection with a “work site marketing” program it operated between 1990 and early last year.
Under the program, which mainly targeted small businesses in Southern California, employees were allowed to set aside pretax dollars for medical, child-care and other expenses and then use the tax savings to buy a universal life insurance policy.
But in many cases, investigators said, buyers were led to believe that the tax savings went toward a retirement fund, when in fact it paid premiums on the insurance policy.
“We regret any misunderstanding that may have occurred in connection with the solicitations made on our behalf for this policy,” Alan A. Grove, the insurer’s vice president and corporate legal officer, said in a statement Monday.
The $5.1-million settlement is the largest ever in a Department of Insurance enforcement action, exceeding the $1.1 million in fines and fees levied against Metropolitan Life Insurance Co. in 1994 in a multistate case involving deceptive annuity sales.
