The Florida Office of Insurance Regulation (OIR) announced today that Allianz Life Insurance Company has agreed to a multi-state settlement with 44 state insurance regulators regarding suitability issues involving the sale of so-called “two-tier” fixed annuities, some of them equity indexed annuities.
The settlement agreement requires corrective action to be taken by the company, a remediation plan and a $10 million penalty to be paid to the participating states.
Lead states involved include Florida, Iowa, Minnesota and Missouri.
According to a statement from the Florida OIR, the states launched a probe after some consumers who purchased fixed annuities from 2001 to 2008 complained to Allianz regarding the annuities’ suitability for their circumstances or representations made by Allianz or its agents during the sale of an annuity.
Under the remediation plan, Allianz will implement a review process addressing new and previously filed complaints by customers who purchased an eligible fixed annuity product between 2001 and 2008.
The agreement allows consumers to have a re-review of their complaints based on criteria in the agreed order.
A new complaint can be filed by affected consumers until March 31, 2013, either through the “Contact Us” feature on Allianz’s website, or by telephone at 866-604-7488, according to the settlement document.
If a complaint is found to be justified, the consumer will be offered a retroactive cancellation of their policy and a full refund.
In the settlement document, Allianz said that, it “wishes to resolve the review in the interest of compromise, to avoid the disruption of its business, and for other reasons, but does not admit or concede any actual or potential violation, fault, wrongdoing, or liability in connection with the review.”
Sara Thurin Rollin, Allianz Life Insurance director of external communications, said that from Allianz Life’s perspective, after a “thorough” regulatory review of Allianz Life’s annuity records from 2001 to 2008, “there was not a particular theme to the market conduct exam,” and “all aspects of our fixed annuity business practices were evaluated.”
She said each state will get an average of $230,000 from the settlement.
She added that Allianz “is pleased” that the final agreement “contains no allegations of wrongdoing, and requires only minor modifications to our business practices many of which already go beyond what is required by state law.”
She added that, “Although we could have continued to dispute the penalty, we would have lost the opportunity to resolve the matter on a large-scale basis.”
Rollin also noted that, in the settlement, Allianz Life pledged to continue existing agent oversight and advertising compliance review programs.
“We will make minor modifications to our complaint handling and replacement procedures and offer to reconsider complaints received on some of the policies that were issued during this eight-year period,” she said.
“These potential complaint reviews represent less than one percent of total policies issued during this period,” Rollin said.
She said Allianz Life also agreed to modify some of its annual statements and add a short product disclosure form to one of its products.
“Together these changes go beyond what is required by state regulation,” she said.
“Allianz Life is proud of the products and services we offer and will continue to provide retirement income solutions to help millions of people prepare for retirement,’ Rollin said in the statement to The National Underwriter.
“Our products — fixed annuities, fixed index annuities, variable annuities, and life insurance — can play a key part in a strong retirement income and protection strategy,” Rollin said.
Among the Allianz Life fixed annuity products covered by the settlement is the MasterDex 10 (MD 10), which California agent Glenn Neasham sold to an 83 year-old woman, resulting in a felony charge of theft due to the alleged unsuitable nature of the product for a woman who turned out to have dementia. Neasham sold the product in February of 2008, right on the edge of the period covered by the market conduct exam.
The MD 10 had been the number-one selling fixed indexed annuity in the country for five consecutive years. It had the best crediting strategy of the 350 fixed indexed annuities available in California. It’s a product that allows you to participate in stock market gains with no downside risk.
Allianz battled class-action lawsuits in the middle part of the last decade, in the period that the multi-state agreement covers, alleging fraudulent marketing of annuity products, including the MD 10 and other products covered by the multi-state settlement announced by Florida.
For the settlement, individual state amounts were determined based on pro-rata share premium volume of the products sold during the scope period of the examination (2001 – 2008). The work was done under the NAIC Market Actions Working Group (MAWG) as a multi-state exam and approved by the MAWG chairperson. In this process, the lead states indicate an interest in cooperating to conduct an exam, and MAWG approves it. Other states may elect to participate, but not manage the exam.