The New York State Insurance Department fined Allstate Corp.'s life insurance subsidiary $1.25 million for not complying with a state regulation to protect consumers from unnecessary flipping of life insurance policies.
Allstate Life Insurance Co. of New York has started a remediation plan and expects to pay out about $17 million in restitution to about 6,500 current and former customers, according to a press release from state regulators. That includes 4,500 people with annuity contracts and 2,000 with life insurance policies. Under state law, Regulation 60 requires insurance agents to provide consumers with a complete and accurate disclosure statement and notice if they are thinking about getting a replacement life insurance policy or annuity, even if it's from the same insurer.
The disclosure statement provides a side-by-side comparison of the old and new policies, information about current and future premiums, guaranteed interest rates, guaranteed values, loan interest rates, surrender values and charges, and death benefits. The notice explains the risks or negatives of taking out a new policy or annuity contract. The goal is to ensure that consumers know the risks and benefits of the replacement, so they can decide if it is truly in their best interest. Both documents must be provided by the time the consumer signs the application.
A state examination of the company, covering 2001 through 2003, found the disclosures from the company were sometimes missing, incomplete or inaccurate. Company recordkeeping also failed to meet the requirements of another regulation governing insurer records.