The New York State Insurance Department has fined three affiliated life and annuity agencies $2 million in connection with concerns about product replacement practices.
The agencies — Citicorp Insurance Agency Inc., Citicorp Investment Services, and SBHU Life Agency Inc. – are units of Citigroup Inc., New York.
The agencies already have paid the fine, according to New York State Insurance Superintendent James Wrynn.
The department imposed the fine in connection with product replacements that took place from 2003 to 2007.
Citigroup is pleased to have resolved the matter, a company representative says in a statement.
A New York department examination “found certain inadvertent violations and other issues under the Insurance Law and department regulations,” the company representative says “We have taken appropriate steps to address the department’s concerns. Citi regularly reviews its policies and procedures in order to best serve our clients.”
Under New York Insurance Law and the New York department’s Regulation 60, a producer selling a replacement for a life insurance or annuity contract must give the consumer information about why buying the new product would be better than keeping the old product.
Consumers must acknowledge that they have received the forms describing the products they already own and the potential replacement products.
In some cases, the Citigroup agencies failed to
provide the type of information consumers needed to compare the products they already owned with the potential replacement products, or the disclosures provided were inaccurate or incomplete, New York department officials say.
The agencies also sometimes failed to report consumer complaints about life and annuity products to the product issuers, failed to give consumers proper explanations of complaint denials; or let supervisors with a financial interest in the outcome of complaints to rule on complaints, officials say.
New York department examiners found that some life and annuity sales violated the agencies’ suitability standards, officials say.
The agencies have agreed to create policies and procedures to address the Regulation 60 violations, improve the complaint process, and make sure all life and annuity sales comply with suitability standards, officials say.