Allianz Life arm agrees to pay $10 million fine

Allianz Life Insurance Co. of North America today reached a $10 million settlement with California’s insurance department for allegedly inappropriate fixed annuity sales. The agreement follows the release of the results of a market conduct examination from the California department of insurance, which revealed that the company had deceptively replaced 126 existing annuities for seniors between the ages of 84 and 85. The analysis also showed that more than 97% of the annuities sold to this age group from January 2004 through January 2005 were “financially unsuitable.” Also, the examination revealed that the group had been using deceptive marketing materials that advertised “immediate” and “up-front” bonuses for the customers, but in fact these consumers wouldn’t get their “bonuses” unless they held the annuity for five years and then received their money back in payments for 10 years or life, the department said. Allianz made no admission of violating the state’s laws. As part of the settlement, the company will pay $3.3 million to the California insurance department in monetary penalties, fees and costs. Allianz will pay $3.75 million over five years to the state’s Life and Annuity Consumer Protection Fund. Another $3 million will go toward investments in the California Organized Investment Network, a program that provides social and economic benefits to underserved urban and rural communities. Additionally, the company has also agreed to tighten its procedures through a suitability review program for all potential senior customers. As part of that program, the company must conduct an elevated review on applicants aged 65 and over, perform a follow-up call to those older than 75 who are living in assisted living facilities to ensure they understand the product, and make their contracts understandable to customers.