Some answers for customers
Q: I'm not a Prudential customer. Why should I care?
A: The task force investigating Prudential came up with lots of information that suggests Prudential wasn't the only company that engaged in misleading or fraudulent activity. One of the next steps of the task force will be to study life insurance sales and marketing practices industry-wide. They then plan to make recommendations and develop guidelines to help prevent future problems.
Q: I am a Prudential customer. How do I know whether I was affected?
A: If you bought a permanent individual life insurance policy from Prudential between 1982 and 1995, you should have received a packet of information from the company by now. If your Prudential agent convinced you to apply the cash value and dividends from one life insurance policies to pay for additional life insurance policies, you should definitely check it out, particularly if your agents told you that you would not have to pay anything more - and then you did have to. Likewise, if your Prudential agent used illustrations (examples of how your policy would produce cash values over time) that turned out to be misleading, you might have a claim.
Q: How do I go about finding out more about whether I am entitled to any money?
A: If you received a packet of information in the mail, you might be eligible. You should have one packet for each policy you purchased from Prudential during that period.
If you have questions about all this, you can call a special toll-free number, 1-800-736-8913. This number is staffed by an independent support team - not Prudential employees. Prudential also has a number you can call, 1-800-837-3645. Also, you can call your state insurance regulator.
Q: Why are four states unhappy with the proposed settlement
A: Some states say simply that they are still in talks with Prudential. Others say they think the settlement isn't generous enough to wronged consumers and that it places too much of a burden on them to prove their case.
Q: What is basic claim relief?
A: It's the equivalent of a "no-fault" remedy and one that requires less effort and paperwork than the next step, alternative dispute relief. Basic claim relief allows eligible policyholders to take out preferred-rate loans or to buy more life insurance or annuities under favorable terms. Everyone who purchased a permanent individual policy during the specified time period is eligible for basic claim relief.
Q: What is alternative dispute resolution?
A: This process is more complicated, but holds out the promise of a bigger pay back. These claims fall into one of four categories, financed/ replacement sales; abbreviated payment plans; life insurance sold as an investment, and others (a catch-all category for claims falling outside the scope of the first three categories).
After being reviewed by the company, claims will assigned scores of 0, 1, 2 or 3 within each category. All of these ratings will be reviewed by impartial, independent, non-Prudential employees approved by state regulators.
- Claims with a score of 0 are not eligible for relief.
- Claims assigned a score of 1 will be restricted to the basic claim relief offered to eligible policyowners in the remediation plan.
- Score 2 relief provides a policyowner with the choice of a refund of premiums paid on the new policy after a deduction for term insurance charges (with a maximum of 50 percent of premium paid) or a reversal of the sale of the new policy and the restoration of the values of the original policy.
- A score of 3 provides the most relief - including the cancellation of the sale resulting in the claim with a full refund of premiums plus interest.
If you are dissatisfied with your rating, you can appeal it. At that point, you would be assigned a policyholder representative to help you. If you choose to participate in the alternative dispute resolution process, you don't have to hire a lawyer. You will be provided with help assembling documents and other assistance, at the company's expense. The only exception to that is if both the company and the independent reviewer think your claim is a zero. In that case, you will be levied a small charge of about $50 or so to go through the appeal process.
Q: If I bought a policy during the specified time period, but then let it lapse, am I still eligible for the program?
Q: If I bought a policy during the specified time period, and then died, can my heirs make a claim?
A: Yes. Also, if you are dead, and are reading this, contact the Guiness Book of World Records. There must be a category or two you fit into.
Q: If I participate in the program, then later decide I want to sue, can I?
A: No. By participating in the program, you give up your right to sue. Also, if you did not file notice with the court by Dec. 19, 1996 opting out of the process, you will have lost your right to sue, if the settlement is approved in its present form.
Q: Questionnaires, ratings, appeals. This all sounds kind of complicated. Why couldn't they just make a blanket settlement and give us our money back without all that?
A: Well, that was an option. But the task force and the laywers who hammered out the proposed settlement took into consideration that Prudential is a mutual company, which means that it is owned by its customers. That means that, in the end, the fines and money for repayment come from the policyholders. Had the task force decided to give automatic relief to anyone, that would have benefited some people who were not harmed in the first place. And that, of course, would harm the rest of the policyholders. They didn't want to make it a free-for-all, so they decided on the file-by-file review.
Q: In addition to having to pay customers back, Prudential also was levied with a huge fine - the largest ever against a U.S. insurer - of $35 million. What happens to that money?
A: That money will be split up between the states. States that participated in the task force will get an extra share to help cover the cost of the investigation. Then, depending on the state, a number of things could happen. It might go into the state's general fund. In some states, it has been earmarked for insurance consumer education. Other states have decided to make direct donations to good causes. But, for the most part, states are opting to have it go into their general funds.