Superintendent of Financial Services Linda A. Lacewell today announced that the Department of Financial Services (DFS) has entered into a consent order with Principal Life Insurance Company for violations of New York Insurance disclosure and suitability regulations in deferred to immediate annuity replacement transactions. Principal will pay more than $6 million in restitution and penalties.
"The Department continues to protect vulnerable New Yorkers, including seniors as they save for retirement," said Superintendent Lacewell. "Today's settlement provides restitution to New York consumers who lost savings after being lured into disadvantageous annuities. This case serves as a reminder to New York's life insurers that they must abide by our regulations and provide full disclosure, so New York consumers are able to invest their life savings wisely. DFS will continue to enforce its regulations against practices that take advantage of consumers."
DFS's investigation found that Principal failed to properly disclose to consumers income comparisons and suitability information, causing hundreds of consumers to exchange more financially favorable deferred annuities with less favorable immediate annuities. Many New York consumers received incomplete information regarding the replacement annuities, resulting in less long-term income.
Today's settlement is the result of DFS's industry-wide investigation into deferred to immediate annuity replacement practices in New York State. To date, the investigation has resulted in settlements with more than 10 carriers, totaling more than $12 million in restitution and penalties.
As a result of the settlement, hundreds of New York consumers will receive additional restitution for the remainder of their annuity contract terms. Principal has agreed to take corrective actions, including revising its disclosure statements to include side-by-side monthly income comparison information and revising its disclosure, suitability, and training procedures to comply with regulations.
Annuities are contracts between life insurance companies and consumers that provide guaranteed payments for the remainder of an individual's lifetime or for a specified period. Immediate annuities provide periodic income payments that begin within thirteen months after the annuity is issued, while deferred annuities allow consumers to earn interest on their premium before receiving payments at a future date. Annuitization is the conversion of the amount of a deferred annuity into a series of payments to the annuitant. Recommending that consumers replace existing deferred annuities with immediate annuities without proper disclosures may cost consumers substantial lifetime income.
Investigations into additional life insurance carriers licensed by the Department remain ongoing.
Read a copy of the consent order here: https://www.dfs.ny.gov/industry_guidance/enforcement_discipline/ea20201029_principal_life