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.

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.

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."