Lawsuits, settlements abound in life insurance industry

Insurance News Network
February 02, 1998

Lawsuits, settlements abound in life insurance industry It's a veritable who's who of life insurance companies. Prudential Insurance Co. of America. Metropolitan Life Insurance Co. Phoenix Home Life Mutual Insurance Co. Connecticut General Life Insurance Co. John Hancock Mutual Life Insurance Co. Mutual Life Insurance Co. of New York.

These well-known insurance giants are among the more than 30 life insurance companies facing lawsuits over alleged deceptive sales practices used in the 1980s and early '90s.

First it was Prudential. Then came Phoenix, CIGNA and Hancock. Now Met Life is under investigation in Florida, Connecticut, Massachusetts and Texas for allegedly bilking its customers.

Several of the lawsuits faced by life insurers claim the companies and their agents promised more than the policies ultimately delivered, while others allege agents used unscrupulous, dishonest and even illegal sales practices in the quest to boost commissions.

Here's a roundup of several of the most prominent cases:

  • Regulators in Connecticut have launched a probe of Met Life's sales practices. The New York-based insurance company's agents allegedly used a sales practice known as "churning," which involves using the built-up cash value of existing policies to pay for new, more expensive policies. Officials in Florida, Texas and Massachusetts are also investigating the company over similar allegations.
  • Documents released in December 1997 by the Florida Department of Insurance don't paint a very rosy picture of Prudential. The documents include internal reports, audits and memos, and the testimony of several former Prudential employees. Prudential is facing the prospect of making restitution for 1.1 million customers -- and a possible cost of more than $2.5 billion. 
  • John Hancock has settled a $350 million class-action lawsuit with about 3.7 million policyholders. The California Department of Insurance hammered out its own settlement with the company in November. Regulators in Florida have also fined Hancock $6 million and ordered the company to compensate some 153,000 policyholders, and set up a toll-free hotline to help policyholders learn more about the state's settlement.
  • Mutual Life Insurance Co. of New York, more commonly known as MONY, can count itself among the few who've won a battle. A New York judge dismissed a class-action suit against the insurer in October.
  • CIGNA customers faced a mid-summer deadline to file claims against the company.
  • Phoenix has settled a class-action lawsuit with its policyholders, but payback may still be a long way off for customers.
Copyright © 1998 INN

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