The California Department of Insurance said today that it wants to shut two life insurers down for a year because of problems with life insurance policy administration.
Department officials say, in an order listing accusations against Accordia Life and Annuity Company and Athene Annuity and Life Company, that the companies have failed to meet California service standards for about 50,000 policies issued to California residents.
Since early 2016, the California department has received more than 100 consumer complaints related to problems with administration of the policies, officials say in the order.
A copy of the order is available here.
The Accordia-Aviva USA Deal
The company now known as Accordia, which was previously known as Presidential Life, is a subsidiary of Commonwealth Annuity and Life Insurance Company.
Commonwealth, in turn, is an Iowa-based subsidiary of Global Atlantic Financial Group Ltd. of Bermuda.
Athene, which was formerly known as Aviva USA, is an Iowa-based subsidiary of Athene Holding Ltd. of Bermuda.
Commonwealth agreed to have Accordia assume responsibility for a block of Aviva USA’s life business in May 2013, while Athene Holding’s acquisition of Aviva USA was pending, according to the California department’s order.
Accordia hired an outside company to administer the old Aviva USA policies. The new administrator pulled one wave of about 264,000 policies into its own systems, and a second wave of about 278,000 policies into its systems, California department officials say in the order.
During the system migration process, the policies “were placed in a ‘restricted’ status, such that they could not be administered electronically and could only be administered on a manual basis,” officials say. “While a policy is restricted, policy values cannot be brought up to date; annual statements and policy illustrations cannot be generated electronically; premium billings and payments cannot be processed; and financial and non-financial transactions requests cannot be timely fulfilled.”
At least several hundred California policies are still restricted, officials say.
“Accordia maintains that an unknown number of policies will forever remain restricted and must be manually administered,” officials add.
As a result of the migration issues, Accordia failed to send all policyhyolders the annual policy reports required by California insurance law, officials say.
Many of the policies involved are universal life policies, with premium bills that vary. While a policy is restricted, a policyholder cannot pay the premium bills or get policy benefits, officials say.
Once Accordia gets a policy out of restricted status, it sends the policyholder a bill for all of the premiums owed, including all of the back premiums, without breaking out the back premiums separately, or giving the policyholder a chance to establish a payment plan to pay the back premiums, officials say.
Department officials are accusing Accordia and Athene of failing to carry out the life insurance contracts in good faith.
Department officials are asking the head of the department, California Insurance Commissioner Dave Jones, to take away the ability of Accordia and Athene to do business in California for one year, to impose fines on the companies, and to issue a cease-and-desist order.
The cease-and-desist order would require the companies to meet California annual report requirements and to provide remedies for the policyholders affected by the policy administration problems.
Representatives from Athene and the Bermuda Monetary Regulatory were not immediately available to comment on the California department order.
Jones, who put out a press release announcing the order, said in a statement that his first priority is protecting consumers and the integrity of the insurance marketplace.
“Consumers should have confidence that companies selling insurance in California are delivering on their promises and are doing so in compliance with our consumer protection laws,” Jones said.
Global Atlantic, Accordia’s parent, said in a statement that the company received a copy of the order Monday and is reviewing the order carefully.
“We will be responding in due course and will work with the California Department of Insurance to resolve this matter,” the company said.
Iowa Insurance Commissioner Doug Ommen said in a statement that the issue has been under review at the National Association of Insurance Commissioners since last year.
“ I was surprised by this unilateral action without notice by California,” Ommen said. “I disagree with [Jones'] assessment regarding assets held by Accordia and do not understand the purpose in including it in his claims.”
— Read Insurers Continue to Rely on Homegrown IT Systems, on ThinkAdvisor.