Oakland – California Insurance Commissioner Steve Poizner reached a $10,050,000 settlement with Allianz Life Insurance Co. for allegedly targeting thousands of seniors in deceptive annuity sales. Allianz, the largest seller of annuities in California, purportedly deceived elderly victims into purchasing confusing annuity products that were financially unsuitable for their needs. In addition to the sizable monetary settlement, Commissioner Poizner announced that Allianz agreed to implement a groundbreaking suitability review process to further protect seniors.
"This landmark settlement ends years of aggressive and misleading marketing schemes targeted to our most elderly and vulnerable," says Poizner. "The fact that Allianz used deceptive practices and high-pressure sales tactics to lure and cajole seniors into buying unsuitable policies is appalling. The new suitability review process Allianz adopted through this agreement represents a new era in annuity sales, and should be the prototype for annuity insurers throughout the state. My department will continue to actively track down insurance companies, agents and brokers who refuse to play by the rules."
Poizner negotiated the settlement based on findings from a Department of Insurance (CDI) market conduct examination. The examination revealed that Allianz had deceptively replaced 126 existing annuities for seniors who were between 84 and 85 years old. CDI's analysis determined that more than 97% of the annuities that Allianz replaced for this age group from January 2004 through July 2005 were financially unsuitable. The market conduct examination also uncovered that Allianz sold new annuities to seniors that were clearly unsuitable for the needs of the customers by using misleading marketing information. The CDI exam showed that Allianz used deceptive marketing materials that advertised "immediate" and "up-front" bonuses for consumers who purchased annuities, when, in fact, consumers would not receive the "immediate" bonuses in the form of cash unless they held on to the annuity for five years and then received their money back in periodic payments for 10 years or life.
According to the terms of the settlement, Allianz will pay $3.3 million to CDI for monetary penalties, fees and costs. Allianz will pay $3.75 million over five years to the Life and Annuity Consumer Protection Fund, which provides funding to district attorneys and CDI to prosecute financial abuse by life agents. All of the $3.75 million will go to district attorneys.
As part of the settlement, Allianz has agreed to Commissioner Poizner's directive to implement a new suitability review program for all potential senior customers. This program is the first in the California annuity sales industry, and an important step towards ensuring that seniors are not deceived into investing money in long term annuities when they cannot pay their living expenses, and are aware of the products they are purchasing. Allianz will also utilize more thorough mechanisms to ensure better senior protection.
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