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February 14, 2008 at 01:23 PM
An insurer has resolved a West Coast annuity investigation by agreeing to offer refunds to some customers, add a screening process for future buyers, and pay $10.5 million in fines and charitable contributions.
Allianz Life Insurance Company of North America, Golden Valley, Minn., a unit of Allianz S.E., Munich, has accepted the terms of the settlement to resolve a California Department of Insurance administrative action.
The California department issued an order objecting to Allianz Life deferred fixed annuity marketing practices in November 2006, after a market conduct examination found that Allianz had “deceptively replaced 126 existing annuities for seniors who were between 84 and 85 years old,” California department officials say.
California department officials contend that about 97% of the annuities that Allianz Life replaced for consumers ages 84 and 85 from January 2004 through July 2005 were financially unsuitable.
In many cases, department officials say, Allianz Life implied that older consumers would get “immediate” bonuses.
The consumers could not collect the “immediate” bonuses in the form of cash unless they held on to the annuities for 5 years and then received their money back in the form of periodic payments for 10 years or life, officials say.
Under the terms of the settlement, Allianz Life will pay $3.3 million in penalties, fees and costs to the California department; $3.75 million over 5 years to a fund that helps district attorneys represent life insurance and annuity owners; and $3 million to a California fund that invests in projects that help urban and rural communities.
