The Minnesota Department of Commerce levied a $250,000 fine against an insurance agent for writing 44 policies worth $127 million on the life of one consumer. In order to secure that much coverage for one individual, the agent misrepresented to insurers the coverage already in force and indicated that replacements would occur, which never did. In addition to receiving sizable commissions on the transactions, the agent also profited by selling the policies in the Stranger Originated Life Insurance (STOLI) marketplace after the two-year incontestability period.
A California annuity-marketing firm was fined $15,000 for sending out deceptive marketing literature. According to the California insurance commissioner, the firm sent out at least 235,000 direct mail pieces to residents. The notices stated that recipients “may have an annuity that has reached the end of its surrender period” and told them to contact the firm. However, the notice failed to mention that the annuity firm was not affiliated with the recipient’s insurance company. In addition to imposing a fine, the department also forced the firm to surrender its license to do business for five years.