Financial Services Superintendent Maria T. Vullo today announced that the Department of Financial Services (DFS) has entered into consent orders with American Family Life Assurance Company of New York (AFLAC), and Transamerica Financial Life Insurance Company for violations of New York Insurance Law and regulation. Under a consent order with DFS, AFLAC has made restitution totaling $961,478.80 to New York consumers for failing to include disclosure language on premium notices in violation of New York Insurance Law and for failing to provide applicants full and clear information related to the replacement of their existing life insurance so that they could make a decision in his or her own best interest in violation of New York regulation. The insurer also paid a civil penalty of $176,890 for these violations and others discovered during a DFS market conduct examination.

“Consumers should be able to trust that their insurers are providing them with information that helps them make the best decision,” said Superintendent Vullo. “DFS’s regulation protects the interest of the public by establishing minimum standards of conduct to be observed in the replacement or proposed replacement of life insurance policies. It is paramount that consumers are provided with clear and thorough information when transacting for life insurance policies. DFS will not allow any licensed entity to obscure transparency for consumers or deprive them of the information to which they are legally entitled. And when consumers are harmed, the Department will take all necessary action to hold insurers accountable and ensure that they receive the restitution they deserve.”

A DFS market conduct examination found that from 2009 to 2011, AFLAC failed to provide the preliminary information to applicants required by New York Insurance law at or before the application was taken; failed to provide important disclosures in life insurance advertisements for policies that are issued with accelerated death benefits; and failed to adequately train its agents to comply with the requirements of DFS regulation related to the replacement of life insurance policies.

Transamerica has made restitution of $582,436.72 to New York policyholders and will pay a civil penalty of $762,700 for violations of Insurance Law and regulation The company will also turn over $105,415.32 in unclaimed funds to the state to be held for the beneficiary or legal heirs of the beneficiary. It is also in the process of locating the beneficiary to pay or turn over to the state $958,802 in benefits. A DFS market conduct examination found that from 2006 to 2009, Transamerica, among other things:

• Sent lapse notices to policyholders that state the payment amount and payment due date payment, as well as other pertinent information;
• Effectuated life insurance policies on the life of minors that were in excess of the amounts allowed by law;
• Failed to provide a revised disclosure statement to the applicant in instances where the life insurance policy issued differed from the life insurance for which the applicant applied;
• Used a disclosure form that did not contain the notice that receipt of accelerated death benefits may affect eligibility for public assistance programs and may be taxable nor disclosure of the amount of any additional premium associated with the accelerated payment or, if there is no separately identifiable premium, whether a discount is associated with acceleration; and,
• Failed to provide an annual notification that the policy contains a cash surrender value and that further information, including the amount thereof, is available from the insurer upon written request from the policyowner.

In addition, from 2010 to 2014, Transamerica failed to, among other violations, include required disclosure language in premium due or insufficiency notices sent to policyholders that states the amount of payment and due date of payment; failed to examine and ascertain that the information included in the disclosure statement was accurate; used policy forms that were not filed with and approved by the Superintendent; failed to provide individual universal life policyholders the required 61-day grace period within which to pay sufficient premium to keep the policy in force for three months; and failed to comply with the orderly working of Regulation 60 in accomplishing its intended purpose in the protection of policyholders and contract holders.

Copies of the consent orders can be found here and here.

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