Citigroup Insurance Agencies Pay $2 Million Fine
New York, N.Y.—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. 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. “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,” stated Superintendent James Wrynn.
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.
New Yorkers Dump Their Vehicles to Collect Insurance Payouts
Albany, N.Y.—Looking for a quick fix to their financial problems, some New Yorkers see insurance fraud as a solution, setting fire to their cars and trucks, abandoning their vehicles or having them disposed of so they can collect insurance claims dollars, according to the New York Alliance Against Insurance Fraud (NYAAIF).
In response to an increase this form of insurance fraud, often called owner giveups, since the beginning of the economic downturn, law enforcement authorities and insurance investigators are taking a close look at suspicious claims involving vehicle fires and theft.
For example, a New York City woman who filed an insurance claims for the theft of her Nissan Altima was arrested last year after her car was found damaged by fire. An investigation by the New York State Insurance Frauds Bureau and New York City fire marshals concluded that the vehicle, factory equipped with a system that only permits operation with a programmed key, was not forcibly entered, the keys had not been duplicated and there was no evidence that the door locks or ignition systems were defeated. The woman was arrested and charged with insurance fraud.
“Working in cooperation with the Frauds Bureau and other law enforcement agencies, insurance industry fraud investigators, are increasingly vigilant about owner give-ups and are aggressively investigating them,” Ellen Melchionni, spokesperson for the Group said. “People seeking to relieve themselves of car payments and other financial burdens through insurance fraud face criminal penalties if convicted of this crime.”
NYAAIF is a cooperative effort by insurance companies in New York to educate consumers about the costs of insurance fraud, the many forms it can take and what they can do to fight back.
