Nationwide To Pay $5.6M For Annuity Violations, NY Regulators Say

Superintendent of Financial Services Adrienne A. Harris announced today that the Department of Financial Services has entered into a consent order with Nationwide Life Insurance Company for violations of New York Insurance regulations with respect to deferred to immediate annuity replacement transactions.

Nationwide will pay approximately $3.4 million in restitution to New York State consumers as a result of the settlement in addition to $2.24 million in penalties. Impacted consumers will also receive higher monthly payouts for the remainder of their contract terms.

Nationwide released the following statement: "Nationwide remains committed to protecting people, businesses and futures with extraordinary care. We continue to urge the NYDFS to focus on promoting clearly articulated regulatory expectations for all industry participants in a manner that protects consumers while concurrently protecting their access to affordable and innovative product offerings. We will continue to work with NYDFS to further develop and maintain clearly defined standards as it relates to transactions that may involve the replacement of an existing annuity. We are pleased to put this matter behind us."

DFS's investigation found that Nationwide failed to properly disclose to consumers income comparisons and suitability information, causing consumers to exchange more financially favorable deferred annuities with immediate annuities. Hundreds of New York consumers - primarily elderly individuals - received incomplete information regarding the replacement annuities, resulting in less income for identical or substantially similar payout options.

"The Department is committed to protecting New Yorkers, especially vulnerable seniors, from illegal and harmful insurance practices, including these kinds of annuity replacement transactions," said Superintendent Harris. "Today's settlement puts money back in the pockets of impacted consumers, contributing to greater financial stability and protection for individuals and their families."

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. Recommending that consumers replace existing deferred annuities with immediate annuities without proper disclosures may cost consumers substantial lifetime income.

Today's settlement is the latest result in DFS's industry-wide investigation into deferred to immediate annuity replacement practices in New York State. To date, the industry-wide investigation has resulted in settlements with thirteen life insurance companies, totaling approximately $29 million in restitution and penalties.

Nationwide has also 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 New York regulations.

Read a copy of the consent order on the DFS website (https://www.dfs.ny.gov/industry_guidance/industry_letters/il20220519_co_nationwide_life).