Allianz Life Insurance Company of America has agreed to offer refunds to thousands of older annuity buyers and to add a screening process for future buyers as part of the restitution process to settle a lawsuit filed by Minnesota Attorney General Lori Swanson.

The lawsuit was filed by Swanson in state court in Minnesota in January 2007, according to the company, based in Golden Valley, Minn. Allianz Life is a unit of Allianz S.E., Munich.

Judge Kevin Burke, a state court judge in Hennepin County, Minn., approved the settlement agreement last week, according to officials in Swanson’s office.

Swanson filed the Minnesota suit in connection with allegations that Allianz Life had sold deferred annuities to Minnesota senior citizens without first determining whether the annuities were suitable investments for the seniors.

The annuities restricted the seniors’ access to their assets in the annuities for as long as 15 years, and, in some cases, the terms of the annuities may have been misrepresented, Swanson alleged.

“The settlement process with Attorney General Swanson was a difficult one, but it soon became clear that the common ground we share is a sincere desire to protect the needs of consumers in the state of Minnesota,” Allianz Life President Gary Bhojwani says in a statement about the agreement.

“With this settlement, Allianz is taking yet another step to continue to earn the trust and confidence that our consumers place in us every day,” Bhojwani says. “I want to express my gratitude for the unwavering support of our 2,200 employees and our distribution customers as we continue to enhance our consumer safeguards and suitability practices.”

Under the terms of the settlement agreement, Allianz Life has agreed to pay the state $500,000 in fees and expenses.

In addition, 7,000 Minnesota consumers ages 65 and older who bought Allianz deferred annuities between Jan. 1, 2001, and the present will receive a letter from the attorney general giving them the opportunity to submit a claim for a full refund without penalties.

If it is determined that the sale was unsuitable or based on misrepresentations, the consumer will be offered a refund of premium, without a surrender charge, plus 4.15% interest, officials say.

In the future, Allianz Life will get detailed information about the finances of older annuity prospects to make sure they have enough liquid assets and disposable income to pay for ongoing living expenses and emergencies without having access to all of the money in the deferred annuity, officials say.

The suitability process will include questions about a senior’s income, living expenses, liquid assets and anticipated changes in finances.

Some answers will trigger closer scrutiny. If, for example, an applicant would have less than $75,000 in liquid assets after buying an annuity, Allianz Life will have to look more closely at the application, officials say.