Prudential Insurance Company of America has agreed to settle investigations started by regulators in New York and California by changing the way it pays group insurance brokers and discloses group insurance broker compensation.
Prudential Insurance, a unit of Prudential Financial Inc., Newark, N.J., also has agreed to settle the investigation launched by New York Attorney General Eliot Spitzer by paying a $2.5 million penalty to New York and by paying $16.5 million into a group insurance policyholder compensation fund.
The agreement with California regulators requires changes in business practices but not cash payments, Prudential says.
The settlement agreement eliminates payment of contingent commissions to brokers in connection with the purchase of group life insurance, group disability insurance and other group insurance products, according to officials in Spitzer’s office.
Prudential will provide full disclosure of broker compensation to employers that want to buy group insurance from it for employees, officials say.
The California settlement includes similar disclosure requirements and also forbids Prudential from entering into any financial relationships, including equity ownership or financing relationships, with brokers.
Another provision forbids Prudential from sponsoring broker production contests or similar programs which provide for compensation or other remuneration, such as trips and gifts, for brokers.
“Prudential cooperated with the authorities throughout the process and voluntarily implemented procedures for the disclosure of contingent commissions retroactive to January 2004,” Prudential says in a statement about the settlement agreement. “The settlement resolves the investigation and is in the best interest of Prudential and its policyholders.”