January 28, 2019
DFS SUPERINTENDENT VULLO ANNOUNCES THAT METLIFE WILL PAY A $19.75 MILLION FINE AND PROVIDE $189 MILLION IN RESTITUTION TO POLICYHOLDERS FOR FAILURES RELATED TO PENSION BENEFIT TRANSFERS
DFS Examination Revealed Insurer Violated Legal Requirements Governing Its Administration of Group Annuity Contracts, Procedures for Searches Against the Social Security Death Master File, and Variable Annuity Replacement Processes
Insurer Unlawfully Released Reserves on In-Force Annuity Contracts for Its Pension Transfer Business and Failed to Promptly Settle Group Annuity Pension Claims
$123 Million in Restitution Already Paid to Consumers Whose Benefits Were Lost or Delayed
Financial Services Superintendent Maria T. Vullo today announced that the Department of Financial Services (DFS) has entered into a consent order with MetLife Insurance Company, under which the insurer will pay a penalty of $19,750,000 for violations of New York Insurance Law stemming from a DFS examination which found that the insurer failed to properly locate and pay benefits to thousands of New York insureds and beneficiaries. As part of the consent order, MetLife will also pay retroactive benefits to policyholders in New York State and elsewhere totaling more than $189 million. The insurer has already paid $123 million of the approximately $189 million to consumers whose group annuity benefits had been lost or delayed, and will pay the remainder going forward.
“Today’s action is a victory for policyholders, whose benefits were not paid due to MetLife’s failures, with the Department taking the necessary action to protect consumers,” Superintendent Vullo said. “The restitution and other corrective actions mandated under this consent order will ensure that consumers are paid the benefits to which they are entitled and that an appropriate fine is paid and procedures put in place to prevent this from happening again. The Department appreciates MetLife’s cooperation in self-reporting its claims issues, resolving these matters, and committing to full restitution to all eligible beneficiaries.”
In addition to the benefits that have already been paid during the course of the DFS examination, MetLife is projected to make the following restitution to consumers:
- $63 million set aside for expected death claims or escheatment based on a Social Security Death Master File process that DFS is requiring the insurer to use to identify life insurance and annuity contract holders who have died or where beneficiaries are unaware that they are entitled to benefits;
- $1.85 million in monthly payments to consumers as the company completes a group annuity remediation process; and
- $1.5 million in restitution to consumers whom the insurer failed to provide with accurate comparisons of fees and expenses when transferring from an existing to a new variable annuity contract.
In today’s consent order, MetLife was cited for violations dating back to 1992 and extending to 2017, including:
- Improperly released reserves for 13,712 group annuity certificates, resulting in a subsequent reserve increase of more than $500 million;
- Failure to adequately search for group annuity certificate holders to whom it owed pension benefits;
- Failure to perform a cross-check against the Social Security Death Master File for group annuitants where a Social Security number was missing or a number was invalid;
- Failure to take reasonable efforts to confirm the death of an insured and timely commence outreach to beneficiaries where it did not have specific information in its administrative systems;
- Failure to research and timely commence outreach where certain variations of an insured’s information existed in its administrative systems;
- Failure to ensure that variable annuity replacement disclosure statements were accurate and compliant with the law; and
- Failure to present consumers with an accurate comparison of the fees and expenses between existing and proposed variable annuity contracts.
In addition to the fine and restitution, MetLife must take the following corrective measures:
- Establish and maintain full statutory reserves for all group pension certificate holders;
- Pay retroactive benefits with interest to already retired group certificate holders or their surviving beneficiaries; and
- Send letters to all group annuity certificate holders no later than 5 years prior to the normal retirement date, including a certified letter around the normal retirement date, and letters at least every five years thereafter until the insurer pays benefits, escheats benefits under the Abandoned Property Law, or definitively determines that it has no payment obligation.
The consent order requires MetLife to retain a third-party servicer that specializes in locating beneficiaries who are due pension benefits and have not been paid. The insurer will be responsible for paying all expenses incurred by the third-party servicer.
The order also mandates that MetLife provide DFS with four detailed remediation plans providing for remediation or restitution to policyholders or their beneficiaries. Under the plans, the insurer will be required to undertake such activities as utilizing an enhanced death database which includes data from sources in addition to the Social Security Death Master File.
A copy of the consent order can be found here.