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Superintendent of Insurance Howard Mills today announced that Allstate Life Insurance Company of New York has been fined $1.25 million for failing to comply with Department regulations intended to protect consumers buying replacement life insurance policies and annuity contracts. The company has begun to implement a remediation plan and expects to pay out approximately $17 million in restitution to about 6,500 current and former customers under the plan.

"This Department will always make sure consumers are treated fairly and in accordance with the rules," Superintendent Mills said. "We take a back seat to no one in standing up for consumers."

The fine and payments resulted from an Insurance Department examination of Allstate Life Insurance Company of New York that found the company had violated state rules protecting consumers contemplating replacing life insurance and annuity policies. About 4,500 people who had annuity contracts and 2,000 people with life insurance policies with the company benefited from the Insurance Department’s action.

"Consumers should have all the information they need in order to make an informed decision," said Superintendent Mills. "If that information is not being provided, the consumer is at a disadvantage and this Department will step in to make sure there is a level playing field."

Allstate Life Insurance Company of New York violated Regulation 60, which helps ensure consumers know the potential pitfalls as well as the benefits of replacing their current life insurance or annuity. The rule says if a shopper is thinking about applying for a replacement life insurance policy or annuity contract, whether from the same or another insurer, the insurance agent must provide a disclosure statement and a notice. This must be accurate and complete, and provided to the consumer no later than when the application is signed. The agent must document that this information was provided.

The disclosure statement provides a side-by-side comparison of the existing and replacement policies or contracts. It includes information about current and future premiums, guaranteed interest rates, guaranteed values, loan interest rates, surrender values and charges and death benefits. The notice explains possible drawbacks of taking out a new contract or policy. With a new life insurance policy, for example, the suicide and incontestable clauses begin anew, which may result in a claim being denied under the new policy that would have been paid under the old one.

The Insurance Department examination, which covered the period from Jan. 1, 2001, to Dec. 31, 2003, found in some instances, the disclosures provided by the company to be missing, incomplete or inaccurate. In addition, the company’s recordkeeping was described as insufficient to meet the requirements of Regulation 152, which sets certain standards for the maintenance of insurer records.

Allstate Life Insurance Company of New York agreed to the findings and the fine in a stipulation in which the company said the violations "were not the result of any conscious company policy to evade the requirements of the Insurance Law and Department Regulations." The company also agreed to take all steps necessary to prevent any similar violations in the future.

Information for consumers considering purchasing life insurance or annuities can be found on the Internet at the Insurance Department’s Life Insurance Resource Center, For more help or to verify if an insurance company or broker is licensed to do business in the State of New York, call the Department’s Consumer Services Bureau at 1-800-342-3736.

Department of Financial Services


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