An insurer has agreed to pay $2.1 million to resolve an investigation involving a mass variable annuity replacement case.
Nationwide Mutual Insurance Company, Columbus, Ohio, says the company's Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company units have executed a settlement agreement with the states of California, Kansas, Minnesota, Missouri and Wisconsin.
In 2001 and 2002, Waddell & Reed Inc., Overland Park, Kan., shifted customers with $616 million in 6,742 variable annuities from one carrier to Nationwide variable annuities, officials say.
The exchanges resulted in 4,937 of the customers paying a total of $9.6 million in surrender charges, and some of the customers ended up with lower death benefits, according to officials at the Minnesota Department of Commerce
Although Waddell & Reed sold the annuities, "regulators from the five states assert that Nationwide Life and Nationwide Life and Annuity did not take the required steps to ensure that Waddell's supervision and control were adequate," Minnesota officials say.
"In entering into this settlement, Nationwide Life does not admit to the allegations made by regulators that it violated any law or regulation," officials say.
Nationwide says it has cooperated fully with state regulators to resolve the matter and reach the settlement agreement.
"We feel it is in the best interests of all parties to settle these matters rather than to continue to engage further resources on them," the company says. "The settlement resolves the matter and allows Nationwide and the participating states to move on. Nationwide stands behind its business practices and entered into this agreement without any admission of wrongdoing."
Nationwide will reimburse affected consumers for surrender charges they may have incurred as a result of the exchanges covered by the settlement, give consumers the option of rescinding some riders purchased in connection with the exchanges, and increase the death benefits for consumers who shifted into annuities with lower death benefits than their original annuities offered, officials say.
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