After a two-hour
presentation, top executives of Prudential Insurance Co. of America
spent most of the rest of a two-day hearing listening to testimony
criticizing their company and its demutualization plan.
The Prudential demutualization plan, which would take the insurer from
being policyholder owned to being a publicly traded company owned by
shareholders, drew fire from former agents, policyholders, and consumer
advocates.
| "We're
pleased that the hearings went the way they were supposed to go — that
they allowed members of the public to raise their concerns." |
The
New Jersey Commissioner of Banking and Insurance, Karen Suter, who
convened the hearing on July 17 and 18, 2001, and whose approval is
required for the demutualization to go forward, also questioned
elements of Prudential's plan for several hours.
Suter's
questions focused on issues of fairness raised by the public testimony
— including how policyholders would be compensated and whether or not
policyholders would be able to understand the plan.
Some
of Prudential's critics alleged that Prudential was trying to curry
favor with wealthy policyholders of Prudential subsidiary Pruco Life
Insurance Co. Prompted by this testimony, Suter also questioned why
Pruco policyholders, who, unlike policyholders in the parent company,
do not recieve dividends and whose policies don't confer ownership of
Prudential, were included in the insurer's proposed payout of cash,
policy credits, or stock in the newly demutualized company.
Other
critics of the demutualization questioned why the only public hearing
on the plan was taking place seven weeks after Prudential mailed out
ballots to policyholders, and only two weeks before the deadline for
votes to be received.
According to New Jersey law, which
some critics claim was written and shepherded through the state
legislature by Prudential, at least one million policyholders must
vote, and two-thirds of all votes received must be in favor of the
plan, for the demutualization to take place. "Prudential's plan is fair and equitable," says Laurita
Warner, a spokesperson for the insurer. "Our executives did respond to
all of the questions that were raised, and they were happy to have the
opportunity to do it."
Some critics, however, were not
convinced. Michael Weaver, a former Prudential Insurance agent and an
outspoken critic of the insurer who testified at the hearing, pointed
out that the only proponents of the plan in attendance in New Jersey
were the insurer's executives.
| "If
you think that this will go through without problems and be done
fairly, then I bet you really do believe in the tooth fairy." |
There
hasn't been any in-depth, independent review of whether or not this is
fair to the policyholders," says Weaver. "If you think that this will
go through without problems and be done fairly, then I bet you really
do believe in the tooth fairy."
According to Weaver,
despite Prudential's claims that the company has changed after the 1996
settlement of claims that its agents systematically engaged in
fraudulent activities in the sale of life insurance,
including churning, forgery, and misrepresentation of life insurance as
investment products, it's still the same company with the same business
problems, as evidenced by new lawsuits in Missouri.
"It's
like alcoholism and denial," says Weaver. "They have a case of
alcoholism going on in that they deny they have a problem. How are you
supposed to trust these people?"
Prudential, on the other
hand, maintains its virtuous intentions. Referring to the controversy
over Pruco Life policyholders receiving compensation during the
demutualization, Warner points out that because they were sold life insurance
policies that were very similar to Prudential policies sold by
Prudential agents, they had a reasonable expectation that they would
have the same rights. "It is just the right thing to do to include those
policyholders," says Warner. "We're pleased that the hearings went the
way they were supposed to go — that they allowed members of the public
to raise their concerns."
|
