New York State
James J. Wrynn Superintendent of Insurance 25 Beaver Street New York, N.Y. 10004
|ISSUED 09/20/2010||FOR IMMEDIATE RELEASE|
David Lerner Associates Inc. has paid a $255,000 fine for not providing required information to some consumers in connection with the replacement of 527 variable life insurance policies and 259 variable annuity contracts. The violations took place between Nov. 1998 and Feb. 2004.
“Replacing a life insurance policy or an annuity carries costs and risks for consumers, and we are adamant that these be fully disclosed,” said New York State Insurance Superintendent James Wrynn. “While the company was cooperative and our investigation showed that it has been in compliance since 2004, we cannot ignore the fact there was systematic noncompliance with our regulations. Protecting consumers is a priority, as this hefty fine demonstrates.”
New York Insurance Law and Department regulations require that any time a life insurance policy or annuity is being replaced, the consumer must first be provided with certain information necessary to make an informed decision, including the reasons for recommending the new policy or contract, and various comparisons between details of the current and proposed policy or contract.
This comparison of risks and benefits might help a consumer understand, for example, if getting a higher interest rate on an annuity in the long run would outweigh the short-term cost of the surrender charge he or she may have to pay to close out the old contract.
Department regulations require that consumers sign a form acknowledging receiving these disclosures. However the company admitted allowing its agents to have their customers sign blank, undated forms, which were subsequently filled in with boilerplate language by unlicensed employees with no direct contact with the customer or knowledge of the reason for the proposed replacements.
Wrynn also warned the agents who made the sales. In a letter to the agents, he reminded them of their legal responsibility to disclose the required information to consumers.
“The agent who completes and signs the forms is responsible for their proper completion and accuracy,” Wrynn said, adding that should any agent involved commit subsequent violations, disciplinary action against the individual agent’s license would be taken.