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Commerce Department fines four national life insurers $800,000 for alleged misconduct

August 16, 2012

For Immediate Release

ST. PAUL, MN – When a loved one dies, the last thing surviving family members need in a time of grief are complex, confusing life insurance claim forms from their insurance company. That’s why the Minnesota Department of Commerce took action today against four national life insurance companies. 

Signed consent orders released today by Commerce Commissioner Mike Rothman detail allegations that Prudential, MetLife, John Hancock, and ING inappropriately enrolled beneficiaries in retained asset accounts when filing life insurance claims. The companies allegedly failed to provide beneficiaries the information they needed to instead choose lump sum cash payments upon the death of their loved ones. 

Following detailed examinations, the Commerce Department has ordered each of the four companies to pay a civil penalty of $200,000, modify its claims processes, change its business practices, and re-establish cash payouts as the default claim option for Minnesota consumers. 

“At the time of a loved one’s passing, filing a life insurance claim should be simple and straightforward,” said Commissioner Rothman. “Beneficiaries deserve all the information they need to make an informed choice about a lump sum payment. Claim instructions should not be used as a mechanism to steer consumers into retained asset accounts.”

According to Minnesota law, life insurance companies are required to provide clear, consumer-friendly instructions for obtaining payments under life insurance policies – including the option to receive their cash benefit in a lump sum. However, the Department’s investigation unearthed evidence that the claim forms of Prudential, MetLife, John Hancock, and ING were allegedly difficult to understand and resulted in many consumers unwittingly enrolling in retained asset accounts – financial products that allow the insurer to hold onto large sums of life benefits that beneficiaries can draw down over time. 

Many Minnesota consumers have unknowingly or unwillingly been enrolled in retained asset accounts, not knowing they were entitled as a beneficiary to the option of a lump sum cash payment. 

The Commerce Department encourages all Minnesotans to know your rights and ask questions. If you have been unknowingly or unwillingly enrolled in a retained asset account, and would rather receive a lump sum cash payment, the Minnesota Department of Commerce encourages you to contact your insurer directly. If you feel you may have been subject to confusing or deceptive claims practices following the death of a loved one, contact the Commerce Department’s Consumer Response Team to file a complaint by email at consumer.protection@state.mn.us or by phone at (651) 296-2488.