Financial Services Superintendent Maria T. Vullo today announced that Athene Life Insurance Company of New York (Athene) and First Allmerica Financial Life Insurance Company (FAFLIC) have entered into a consent order with the Department of Financial Services (DFS), under which Athene will pay a fine of $15 million and FAFLIC will make remedial efforts totaling approximately $40 million for violations of New York Insurance Law and regulations.  A DFS market conduct examination, which was initiated following consumer complaints, found that Athene did not provide required information to about 15,000 policyholders, including premium notices, annual reports or cash surrender value notices, and annual privacy notices from 2015 to 2017.

“Insurers who outsource their responsibilities to third parties are still responsible to meet all of their obligations under the law,” said Superintendent Vullo.  “Consumers must be able to trust that insurers are in compliance and are providing the required levels of service for life insurance policies.  Given the increased frequency with which insurers use third-party providers, insurers will be held accountable for any failures to meet their legal obligations, even if that failure was the fault of a third-party provider.”

The violations occurred after Athene ceded almost all of its life insurance business through a series of reinsurance agreements to FAFLIC and entered administrative service agreements with FAFLIC related to those reinsurance agreements. First Allmerica Financial outsourced the data conversion and administration of the policies to Computer Sciences Corporation, now DXC Technology.

The DFS market conduct examination found that from 2015 to 2017, Athene failed to do the following, among other violations:

• Mail premium due notices for an amount of approximately $81 million to policyholders at their last known address;
• Provide annual reports or cash surrender value notices to policyholders;
• Provide a statement at least annually to each holder of a policy under which additional amounts are credited and are marketed with an illustration; and,
• Provide annual privacy notices to policyholders during the examination period.

In addition to the fine, FAFLIC will take corrective actions for each violation, including the following measures:

• Hardship waivers of back premium for individuals who did not receive premium notices;
• Special premium arrangement offers to policyholders to extend payments of back premiums for up to five years without interest;
• Whole life and term life policyholders can elect not to pay back premiums due and instead have the unpaid balance deducted from any death benefits payable or other cash disbursements; and
• Retroactive fixed interest credits and a 5-year no-lapse guarantee to all eligible universal life and indexed universal life policyholders that pay back premiums.

A copy of the consent order can be found here.

A copy of the report on market conduct examination can be found here.

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