Allianz to Pay $10 Mln in Calif. Annuities Case
By Jonathan Stempel
NEW YORK (Reuters) - Alliance Life Insurance Co of North America agreed to pay $10.05 million to settle allegations that it tried to steer thousands of California senior citizens into buying unsuitable annuities, state insurance commissioner Steve Poizner said on Thursday.
The state's largest seller of annuities also agreed to bolster its review procedures to ensure that agents don't push senior citizens into purchasing annuities they don't need, and that customers understand annuities better before buying them.
Allianz will pay a $3 million fine, $3.75 million over five years into a fund used to prosecute financial abuse by life insurance agents, $3 million into the California Organized Investment Network, which serves investors and underserved communities, and $300,000 for costs.
The settlement "ends years of aggressive and misleading marketing schemes targeted to our most elderly and vulnerable," Poizner said in a statement.
People often buy annuities from insurance companies for retirement, with taxes deferred until withdrawal. Fixed annuities pay guaranteed amounts at regular intervals. Variable annuities pay amounts that vary with accounts' values. Some critics say annuity fees and surrender charges are too high.
Allianz Life did not admit wrongdoing, and said the settlement concerned fixed annuities. In a statement, the unit of Germany's Allianz SE (ALVG.DE) said it will enhance its analyzes of customers' needs in terms of income, liquid assets and net worth.
Poizner said Allianz "deceptively replaced" 126 annuities for customers who were 84 or 85 years old, and 97 percent of the replacements were unsuitable. He also accused Allianz of promising immediate "bonuses" for customers who bought its annuities, when in fact they were not eligible for five years.
In one case, Allianz induced an 85-year-old woman to liquidate existing annuities and pay a surrender charge of more than $51,000, Poizner said.
In another, Allianz pushed an 85-year-old man to liquidate two annuities by falsely saying he could get an immediate bonus and could withdraw his money without penalty, Poizner said.
(Editing by Leslie Gevirtz, editing by Gerald E. McCormick)
