Mutual of Omaha (Neb.) Insurance Co. yesterday settled with the Connecticut Attorney General’s Office following an investigation into the insurer’s practices in selling single-premium group annuities to pension plan sponsors.
The insurer will pay $1.5 million into a restitution fund for certain pension plan customers across the country, as well as an additional $195,000 civil penalty to the state of Connecticut.
Mutual of Omaha will also undertake massive business reforms.
As far back as 1999, Mutual of Omaha had paid a group of brokers about $1 million in secret compensation for selling single-premium group annuities to pension plans, according to Connecticut Attorney General Richard Blumenthal.
The broker agencies included BISYS Insurance Services Inc. of Harrisburg, Pa., and Dietrich & Associates Inc. in Plymouth Meeting, Pa., according to the state.
The payments allowed Mutual of Omaha to pay extra compensation to producers so that the insurer could compete with other carriers’ commission programs.
In one example, the company told Kurt Dietrich, a key broker at Dietrich & Associates, that his firm was “a tremendous partner, and we are all anxious to supply you with the incentive compensation program that befits a person of your stature,” according to settlement documents.
These payments were then loaded into premiums for private and public pension plans, disguised as a “consulting service” or a “commission” in documents from Mutual of Omaha.
There were at least 78 cases in which one of these annuities were sold with extra pay to the broker.
In addition to the fine, Mutual of Omaha will now have to impose an eight-year ban on broker compensation aside from disclosed commissions for the annuity sales, give brokers and customers written disclosures of all compensation and receive written consent from consumers on the terms.
The company will also have to post a disclosure of its compensation policies on its website, and implement written conduct standards on payment to brokers and employee training.
The company is the third insurance carrier in the single-premium group annuity market with which Connecticut has settled. The other two are The Hartford (Conn.) Financial Services Group Inc. and The
Principal Financial Group Inc. of Des Moines, Iowa.
