New York State's Department of Financial Services has entered into consent orders with six life insurance companies over violations of the state law covering transactions in which deferred annuities were replaced by immediate annuities.
Collectively, the insurers will pay $1,152,154 in restitution, plus $673,000 in penalties. The six companies are: Companion Life Insurance Co., The Guardian Insurance & Annuity Co. Inc., Northwestern Mutual Life Insurance Co., The Penn Mutual Life Insurance Co., The Prudential Insurance Co. of America, and United States Life Insurance Co. in the City of New York.
An investigation by the department found that the carriers failed to properly disclose income comparisons and suitability information to consumers, causing them to exchange more financially favorable deferred annuities for immediate annuities.
Many consumers also received incomplete information regarding the replacement annuities, resulting in less income for identical or substantially similar options, said Linda A. Lacewell, the state's financial services superintendent.
As part of the agreements, many New York consumers will receive additional restitution in the form of higher monthly payout amounts for the remainder of their contract terms.
Restitution payments to be paid by insurers ranged from $14,020 for Prudential to $462,122 for Companion Life, which also will pay the single largest penalty, at $186,000. Northwestern Mutual will pay the smallest penalty, at $26,000.
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