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NASD Probes Northwestern Mutual Sales Practices

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The National Association of Securities Dealers is investigating allegations that some agents of Northwestern Mutual Life Insurance Company misled some customers into buying certain variable life insurance policies.

A spokeswoman for Northwestern Mutual, in Milwaukee, acknowledges the investigation but insists the company did nothing wrong in any of the cases cited by the NASD.

She also said the investigation was part of an industrywide probe of sales practices that the NASD began in 1999.

“We were at the end of the train, in a sense,” says the spokeswoman, Deanna Tillisch.

NASD officials approached the company in April 2001 and asked for a “representative sample” of variable life insurance policy owners, she says. Northwestern supplied around 2,500 names.

Recently, the investigators came back to Northwestern, challenging sales of variable products to 20 of those customers. According to Northwesterns account, the NASD investigators suggested some of its agents sold the products inappropriately.

In at least one case, an investor was sold a variable life contract as a retirement savings vehicle, according to a report in the Wall Street Journal.

Tillisch stressed that the 20 cases questioned by NASD investigators were not a result of complaints from any specific customers. “We went back and looked at them, and we stand by them,” she says.

Northwestern tells its sales reps to inform customers upfront that the primary reason for life insurance is the death benefit, Tillisch says.

An NASD spokesman declined to comment on the allegations. The spokesman did note, however, that the NASD, SEC and some states have acted recently against certain sales practices involving variable products. Those cases centered on allegations of unsuitable recommendations or inadequate explanations of the complexities of variable insurance products, the NASD says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, February 20, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.