The Background

At the center of the giant class-action case against Prudential is a practice known as churning.

Churning was directed largely at older customers with paid-up life insurance policies. Prudential agents often persuaded them to take out new, much larger policies on the promise that it wouldn’t cost them anything. But the customers weren’t told that their old policies were being drained of their cash value--often as a result of signatures forged on authorization forms--to fund the new policies.

Once that money was used up, they were hit with unexpected bills for high premiums. Many of the clients, unable to pay the premiums, lost their coverage. Meanwhile, the sales agents pocketed commissions from the new policies.

Holders of as many as 10.7 million Prudential policies may have been victimized by churning and related fraud, investigators say. That includes virtually everyone who bought a whole life policy from Prudential between 1982 and 1995.

Prudential’s behavior led to investigations in numerous states and to the class-action lawsuit that engendered the settlement. Insurance regulators in all 50 states have agreed to the settlement, following last-minute negotiations with regulators in California and three other states who insisted that the initial terms be sweetened.