The New York State Department of Financial Services ("DFS") has entered into consent orders with six life insurance companies: Companion Life Insurance Co., The Guardian Insurance & Annuity Company, Inc., Northwestern Mutual Life Insurance Co., The Penn Mutual Life Insurance Co., The Prudential Insurance Company of America, and The United States Life Insurance Company in the City of New York.
The consent orders resolved allegations that the insurers had violated New York insurance regulations in deferred to immediate annuity replacement transactions.
Under the consent orders, the insurers, collectively, will pay $1,152,154 in restitution to New York State consumers, plus $673,000 in penalties.
The DFS said that it found that these six carriers failed to properly disclose to consumers income comparisons and suitability information, causing consumers to exchange more financially favorable deferred annuities with immediate annuities. According to the DFS, many New York consumers received incomplete information regarding the replacement annuities, resulting in less income for identical or substantially similar options.
Last year, the DFS issued a regulation in an effort to ensure that recommendations related to life insurance and annuities were in the best interest of the consumer and appropriately addressed the insurance needs and financial objectives of the consumer at the time of the transaction.
Below are the estimated consumer restitution and penalty amounts for each carrier:
| Carrier | Consumer Restitution | Penalty |
| Companion Life | $462,122 | $186,000 |
| Guardian | $218,589 | $224,000 |
| Northwestern Mutual | $31,937 | $26,000 |
| Penn Mutual | $322,584 | $133,000 |
| Prudential | $14,020 | $35,000 |
| U.S. Life | $102,902 | $69,000 |
| Total | $1,152,154 | $673,000 |
The DFS added that, as part of the agreements, many New York consumers would receive additional restitution going forward in the form of higher monthly payout amounts for the remainder of their contract terms. The insurers have agreed to take corrective actions, including revising their disclosure statements to include side-by-side monthly income comparison information and revising their disclosure, suitability, and training procedures to comply with regulations.
Learn more: Consent orders.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].