A life insurer, financial services marketing firms and an insurance agent have agreed to pay a total of $7.2 million in fines and settlement fund deposits to resolve a California annuity marketing lawsuit.
No defendant in the suit, which was filed in a state court in Los Angeles, has admitted to any wrongdoing, according to California Insurance Commissioner Steve Poizner and California Attorney General Jerry Brown.
Poizner and Brown have accused the defendants of using offers to help older consumers with estate planning as a pretext for selling them living trusts and unsuitable annuities.
The defendants participating in the settlement include American Investors Life Insurance Company Inc. of Kansas, a subsidiary of the old AmerUs Group, Company, Des Moines, Iowa; Family First Advanced Estate Planning, Woodland Hills, Calif.; Family First Insurance Services, Woodland Hills; and John Owen, an insurance agent.
AmerUs was acquired by Aviva P.L.C., London, in November 2006.
The “stipulated judgment” setting out the settlement agreement, which is not subject to court approval, will require the defendants to pay $1.7 million in fines to the California Department of Insurance and the California Department of Justice.
The agreement also requires the defendants to deposit $5.5 million in settlement funds, to compensate California consumers who bought American Investor annuities through Family First Insurance Services and incurred surrender charges, officials say.
American Investors has agreed provide a “hardship waiver” for surrender charges for annuity owners who bought annuities through Family First Insurance Services or its agents, want to cash out, and would have a difficult time paying the surrender charges, officials say.
Consumers who have not already received a future credit of 55% or more of their surrender charges will be allowed a one-time offer of receiving the value of their annuities in monthly payments along with a bonus of 1% to 1.25%, officials say.
Owen has denied the material allegations and wrongdoing alleged by state regulators, but he has stipulated that his life agent license be restricted for 5 years, officials say.
Family First Insurance Services, which also denies all material allegations, has agreed to the revocation of its license, officials say.
The defendants in the case also have agreed to add “and insurance sales presentation” following the appearance of a term such as “class” or “seminar” in any insurance advertisements.
Owen and the Family First firms could not immediately be reached for comment.
Aviva is welcoming the announcement of the settlement.
“We are … pleased that the settlement provides valuable benefits to our customers that we hope will address their concerns,” the company says in a statement.
“Compliance is one of our top priorities and we are committed to delivering quality products and services that meet the individual needs of our customers,” the company says. “As soon as we learned that there were potential violations of California insurance laws and regulations, we took action to address those issues.”
Aviva has one of the strongest suitability requirements in the industry, and it requires completed suitability forms from all agents, in all states, for all policyholders regardless of age, the company says.
“In many cases, our requirements exceed those required by the state in which the policy is issued,” Aviva says. “Each sale is unique and our suitability process is designed to ensure that our agents consider each customer’s individual circumstances in making recommendations concerning our products.”
Less than 1% of customers have made complaints about Aviva products, the company notes.