Three Citigroup-affiliated insurance agencies have paid a $2 million fine to New York to resolve insurance law violations committed from 2003 to 2007, New York State Insurance Superintendent James J. Wrynn announced on Dec. 21.
The violations found by the department 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, according to the New York department.
The agencies included: Citicorp Insurance Agency, Inc.; Citicorp Investment Services; and SBHU Life Agency, Inc.
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.
The agencies are promising to take remedial action, according to the New York department. They 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.