New York State
James J. Wrynn Superintendent of Insurance 25 Beaver Street New York, N.Y. 10004
|ISSUED 12/21/2010||FOR IMMEDIATE RELEASE|
Three Citigroup-affiliated insurance agencies have paid a $2,000,000 fine to New York to resolve insurance law violations committed from 2003 to 2007, New York State Insurance Superintendent James J. Wrynn announced today.
An Insurance Department examination of Citicorp Insurance Agency, Inc., Citicorp Investment Services, and SBHU Life Agency, Inc., found violations of the Insurance Law and Department regulations with regard to certain sales practices surrounding life insurance and annuity sales by the agencies. These included failure to disclose required information comparing policies or contracts being replaced with their potential replacements, and inaccurate or incomplete disclosure of policy or contract values or surrender charges.
“Consumers considering replacing an annuity or insurance policy should get all the information they need in order to make an accurate comparison,” Wrynn said. “Our regulations require it and we will enforce it. These are complex products and consumers may not be able to easily weigh the effects of surrender charges, interest rate changes or other hidden costs, for example. We insist upon accurate side-by-side comparisons of these products in order to protect consumers.
“This major fine reflects the seriousness of these violations. It is imperative that consumers, especially seniors, receive a full explanation of the pros and cons of replacing a life insurance policy or annuity contract so they are not financially harmed. The agencies have agreed to put into place policies that will prevent a recurrence of these violations.”
The violations involved the Department’s Regulation 60. When a transaction involving the replacement of an existing life insurance policy or annuity contract is likely to occur, Regulation 60 requires the agent or broker to present to the applicant specific information including the primary reason for recommending the new life insurance policy or annuity contract and why the existing policy or contract does not meet the applicant’s objectives. In addition, the agent or broker must have the applicant acknowledge that both forms have been received and read. This was not always done or not always done properly, the Department’s examination found.
The Department examination also uncovered issues surrounding complaints filed by consumers after buying annuities or life insurance policies. The complaint process was flawed for various reasons, including that complaints were sometimes not reported to the insurance company that issued the annuity or policy; the reasons for denial of a complaint were not properly explained to consumers; supervisors with a financial interest in the outcome of complaints were allowed to rule on complaints; and proper documentation to allow Department review of complaint handling was not maintained.
In addition, the examination found that sales of some life insurance policies and annuity contracts were in violation of the agencies’ own suitability standards.
Among other actions, the agencies have agreed to create policies and procedures to address the Regulation 60 violations, fix the complaint process, make sure all life insurance and annuity sales comply with applicable suitability standards and take any other steps necessary to prevent a recurrence of the violations. They will file reports with the Department within 90 days, with follow-up reports every 120 days as the Department deems necessary.
The examination was conducted by the Department’s Life Bureau assisted by the Consumer Services Bureau (CSB). It was triggered by consumer complaints to CSB. The stipulation was negotiated by members of the Department’s Office of General Counsel, led by Assistant Deputy Superintendent and Counsel Jon Rothblatt.
Consumers who have concerns about life insurance or annuity purchases or any other insurance issue can contact the Department’s Consumer Services Bureau at 1800-342-3736 from 9 to 5 workdays, or visit the Department’s website at www.ins.state.ny.us.