For immediate release: March 8, 2010
(ST. PAUL, MN) The Minnesota Department of Commerce has fined Des Moines, Iowa-based American Equity Investment Life Insurance Co. $275,000 for allegedly selling unapproved annuity contracts in the state of Minnesota. As a result, consumers who purchased the contacts were subject to higher surrender charges and less favorable terms. The total face value of the unapproved policies sold in the state exceeds $28 million.
Minnesota law requires that any annuity contract issued to a Minnesota resident is presented on a form that has been approved by the Minnesota Department of Commerce. Between 2002 and November 2008, American Equity allegedly issued 541 annuity contracts in the state on forms that had not been approved by the department.
In addition to the penalty, American Equity must change the 541 contracts to shorten and reduce the surrender charge provisions to comply with Minnesota law, which generally allows up to a 9 percent surrender charge for a 9-year period. The company must also reimburse all policyholders that surrendered their contracts prior to the department's consent order to make up the difference between the surrender charge they actually incurred and the surrender charge to which they would have been subject had the policy complied with Minnesota law. Affected policyholders will be notified by American Equity by mail of the policy changes.
American Equity must also create and maintain procedures to ensure that only policies filed and approved by the department are issued to Minnesota residents. The company must also establish and audit program to ensure its insurance producers comply with these policies and procedures required by law.
Other annuity-related actions taken by the Minnesota Department of Commerce
In February, five state insurance regulators, including the Minnesota Department of Commerce, entered into a $2.1 million settlement with Nationwide Life Insurance Co. and Nationwide Life and Annuity Insurance Co. relating to the alleged unsuitable sale of Nationwide Life variable annuities to clients of Kansas-based financial advisory firm, Waddell & Reed Inc.
In October 2007, the Department fined American Investors Life Insurance Co. and two of its subsidiaries $1.4 million for allegedly using deceptive sales practices and selling annuities that were not suitable for Minnesota consumers.
In April of 2006, the Department fined Conseco Insurance $2.5 million for allegedly deceptive sales practices and violations of Minnesota's suitability laws.
In April of 2005, the Department fined Pacific Life Insurance Co. $950,000 for allegedly deceptive sales practices and violations of Minnesota's suitability laws.