Prudential's Policyholder Remediation Plan letters: You are not being offered the highest level of relief
The Prudential Insurance Company of America
Policyholder Remediation Plan
Box 780, Newark, NJ 07101
January 26, 1999
[Policyholder name and address]
We have completed our evaluation of your claim in the Alternative Dispute Resolution (ADR) Process involving your above Prudential life insurance policy. This determination affects only this claim; you will receive separate notices if you have any other pending ADR claim(s). You are being offered a choice of relief to address your claim. Before we can finish processing your claim, you must let us know which form of relief you prefer among the choices available. Alternatively, since you are not being offered the highest level of relief possible, you have the right to appeal to an independent reviewer as explained later in the attached brochure. However, an independent reviewer may raise or lower the relief offered to you.
Please carefully read all these materials about the relief available regarding your claim and your appeal rights. Then make your choice on the enclosed Selection Form. The completed Selection Form and enclosed Tax Withholding Election Form must be returned to us by March 12, 1999.
Based on a careful review of your claim and other information in you claim file, we have determined you are entitled to receive relief regarding the following:
A Financed Insurance Claim and An Abbreviated Payment Claim.
You may choose relief from any one of the following:
Choice A. POLICY CANCELLATION AND REFUND
This Choice essentially allows you to reverse the purchase of your policy, cancel this insurance coverage and get money back.
Choice B. POLICY ADJUSTMENT
This Choice allows an adjustment of your policy concerning your out-of-pocket payments.
Choice C. BASIC CLAIM RELIEF
This choice generally allows you to select the Basic Claim Relief options originally made available to you with the election materials for this plan. This option, however, may not be as valuable as the options listed above.
Each of these choices is described in more detail in the following attachment, along with general tax information.
Please note, however, Prudential cannot provide you with tax advice about the tax treatment of these choices of relief as applied to your individual situation. You should consult with your tax advisors as to how the general tax information applies to your individual situation. Any taxable income is generally reportable to you and the IRS by Prudential on a Form 1099-R and may be subject to withholding.
Amounts contained in this letter may not reflect recent transactions on your policy.
A Notice also is enclosed informing you that Prudential is considering reorganization from a mutual life insurance company to a stock life insurance company. Prudential will ensure that your choice of relief in the ADR Process now will not preclude your possible future right to participate if Prudential does demutualize, as the Notice more fully describes.
If you are not satisfied with this decision, you may request a review of your claim by an Appeals Committee reviewer, instead of selecting a choice of relief. The reviewer will disregard this decision and will independently consider your claim. The Appeals Committee is independent of Prudential, and is a part of the ADR Process accepted by the insurance department of your state and approved by the federal court in a nationwide class action settlement.
The Appeals Committee reviewer will consider your claim based upon the materials already in your claim file and will apply the same guidelines for claim review and remedies used throughout the ADR process. The decision of the Appeals Committee can result in relief that is higher or lower than the choices described in this letter. The final decision of the appeals committee is binding upon you and Prudential. If you so request, you will be assigned an attorney representative to assist you without cost. More details about the Appeals Committee review process are described in the brochure enclosed with this letter. You do not need to retain a lawyer to use the appeals procedure.
To select the relief you desire, mark the box for that choice on the enclosed Selection Form. Please make sure that:
Please use the enclosed postpaid envelope. (Note that the delivery address is a post office box. Many delivery services may not be used when the delivery address is a post office box and the following address should be used instead: 213 Washington Street, Mail Drop 16 GC2, Newark, New Jersey 07102.) We will send you a confirmation letter once we receive your selection Form. We will also notify you as soon as possible about the implementation of the choice of relief you selected.
It is important to return your Selection Form on or before March 12, 1999. If your Selection Form is not returned to us by March 12, 1999 you will waive your right to any relief in the ADR Process.
Please read all of the accompanying materials carefully before you make your decision. If you have any questions, please call our Customer Liaison Group at (800) 778-5659. You can reach us Monday through Friday between 6:00 a.m. and 11:00 p.m., Eastern time. Staff members are also available 24 hours a day, 7 days a week, at this number to answer general questions about your claim. Hearing- and speech-impaired policyowners with TDD/TTY equipment can contact us at (800) 953-6078.
Throughout this process, Prudential has been committed to doing the right thing for its customers. Nothing is more important to us. As we complete the remediation process, please accept our sincere apology. It is our hope that you will give Prudential an opportunity to serve you in the future.
[customer service rep name]
POLICY CANCELLATION AND REFUND - This Choice essentially allows you to reverse the purchase of your policy No. [number], cancel this insurance coverage and get money back. Under this Choice, we will cancel your policy No. [number] and refund to you in cash all of the payments made for that policy, after making the deduction listed below, if applicable, for a refund of approximately [dollar amount], plus interest.
Deduction -- We are subtracting any amounts that were paid from your policy (including those used to pay part or all of a policy premium). Examples include:
Interest -- We will add interest to the refunded payments. Interest will be calculated from the date each payment was made and from the date each deduction (if any) was made. We will use the interest rates in effect over the same period for policy funds left with us under a settlement option, increased by 1.5%. The settlement option interest rate changes periodically. In 1982 the rate was 8.00%. It reached a peak of 9.25% in 1989. The rate for 1998 was 4.35%. The interest rate in effect during 1998 and later will be adjusted annually.
Note: The approximate cash refund amount stated above will not be less than an amount equal to the cash surrender value of your policy.
Note on Policy Cancellation: You may not be able to obtain comparable life insurance coverage, or to obtain life insurance coverage at similar rates. You should carefully consider any decision to cancel your life insurance coverage in light of your need for life insurance and your current ability to secure other coverage based upon your present health and insurability.
Tax Information -- As a general rule, the amount refunded for the cancellation of a policy is taxable income to the extent the amount refunded exceeds the policy's cost basis. In general, cost basis is gross premiums paid for the policy less any untaxed amounts previously received. Any unpaid debt on a canceled policy is considered an amount refunded for this purpose, which is then used to repay the debt. The amount includible in taxable income, if any, may be subject to a penalty tax of 10 percent if the life policy is a modified endowment contract, unless the refund is made to you on or after age 59 1/2.
POLICY ADJUSTMENT - It was determined as part of your claim that the sale of your policy No. [number] was based upon a plan in which out-of-pocket premiums would be required on the policy for a limited number of years, at which time the policy's contract fund would have accumulated in sufficient amount to pay its own premiums.
This Choice allows an adjustment of your policy No. [number] concerning your out-of-pocket payments. No further out-of-pocket premiums will be needed on your policy No. [number], after payment of the premium(s) as specified below. Any necessary price adjustments will be repaid to us, as described below, from any future withdrawals, loans and surrenders and from the policy death benefits.
Restoration of policy values, if applicable - Under this Choice, values that were paid from your policy No. [number] (including those used to pay all or part of a policy premium) must be restored, with interest. Examples include:
Back amounts due - Before we can apply this relief, all premiums that remain due, plus any policy values that need to be restored, totaling approximately [dollar figure], must be paid to us. This amount will be adjusted for any out-of-pocket loan remittances you have made, if applicable.
Further premiums due - Policy premiums of [dollar figure] per year through March 25, 2001 must continue to be paid when due. You may contact Prudential if you would like to apply dividends from your original policy(ies) if available, toward the satisfaction of all or part of these future premiums due.
Adjustment - Beginning with the premium due on your policy No. [number] after March 25, 2002, and for all remaining premiums due on your policy No. [number], we will use your policy's excess contract fund values to pay the premiums on your policy. If the excess contract fund values are not sufficient to pay premiums, we will adjust the price of your policy No. [number] so that no further out-of-pocket premium payments will be needed to keep the policy active.
Please note the following:
Our obligation to carry out this relief will end, your policy No. [number] will operate under its contractual terms, and the record policyholder(s) will be responsible to pay all premiums needed to keep the policy active if any of the premium payments specified above as payable to us are not paid as specified, or if any of the following policy transactions are authorized in the future:
The cost of any price adjustments made to your policy No. [number] will be repaid to us automatically,
Please contact us at (800) 778-5659 to verify the options available to you.
If you choose this form of relief you must sign and return, with your selection, the enclosed collateral assignment form, which will permit these provisions to become effective. Your signature and submission of this form evidences your acceptance of the limitations outlined above. Otherwise, this relief will not take effect.
Tax Information -- As a general rule, the adjustment of the price of your policy so that no further out-of-pocket payments or premiums are needed should not result in taxable income to you. Of course, only premium payments made by you are considered for purposes of determining the policy's cost basis.