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
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
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
Phoenix has settled a class-action lawsuit with its policyholders, but
payback may still be a long way off for customers.