New York fines Prudential $1.5 million for misleading customers
The New York Insurance Department has levied a $1.5 million fine against Prudential Insurance Co. of America after a routine follow-up on old violations turned up new ones.
The fine applies to Prudential life insurance sales between 1996 and 1997, and follows a $20 million penalty that was imposed by the National Association of Securities Dealers (NASD) for misleading sales of variable life insurance from 1983 to 1995.
For this latest New York fine, Prudential waived its right to a hearing by entering into a stipulation with the Insurance Department. This means that Prudential admits to:
- Failure to produce documents requested by regulators
- Failure to maintain control of its advertising
- Misleading customers by marketing its Living Needs Benefit as free of charge when in fact an administrative fee is charged for the rider
- Not including home-office address or policy-form numbers in its advertising material
- Failure to file a Schedule G form, which lists amounts over $60,000 paid to any person, firm, or corporation
- Failure to acknowledge complaints within the required 15 business days
- Not having complaint files readily available for examination by regulators
- Using unapproved forms for group credit life insurance.
Prudential spokesperson Bob DeFillippo says the citation is "regrettable and entirely inadvertent." He adds, "We're going to provide our staff that does that work with additional training."
The Wall Street Journal reports that Prudential already has paid a total of $65 million in penalities to state insurance regulators, including a $5 million fine from New York in 1995. Further, Prudential is still paying out for its federal class action lawsuit for fraudulent sales practices, for which it has set aside $2.6 billion in anticipation of settlement payments.
The auditing committee of Prudential's board of directors is responsible for monitoring — and reporting back to New York's insurance superintendent — the company's regulatory compliance every six months for the next three years.