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Insurance company fined $375,000 for improper sales to seniors

November 26, 2008

Insurance company fined $375,000 for improper sales to seniors

For Immediate Release: November 26, 2008
Contact: Bill Walsh (651) 296-7531

Physicians Mutual Insurance agrees to stop doing business in the state and provide restitution to Minnesota consumers.

(St. Paul, MN) The Minnesota Department of Commerce fined Physicians Mutual and Physicians Life Insurance Companies $375,000 for using deceptive sales practices and selling Medicare supplement plans, long term care insurance and annuities that were not suitable for Minnesota consumers. In addition to paying the fine and agreeing to stop doing business in Minnesota, the company also agreed to a robust restitution plan including a suitability review process for handling complaints that will result in direct financial restitution for Minnesota consumers.

The Department charged Physicians Mutual Insurance Company of Omaha, Nebraska with twelve types of violations of Minnesota insurance law including:

  • Failing to determine the suitability of their Medicare supplement, long term care and life and annuity products for senior citizens.

  • Improperly replacing Medicare supplement policies without fully informing the consumer.

  • Charging unreasonable and predatory premiums in relation to the benefits of the insurance products.

  • Disseminating marketing materials that contained deceptive and misleading information.

  • Failing to provide consumers with the proper notices and copies of applications required under Minnesota law. 

"This is another important case in our ongoing campaign to protect seniors from illegal insurance sales practices," said Glenn Wilson, Commissioner of the Minnesota Department of Commerce. "We expect every insurance company doing business in Minnesota to comply with our laws, especially when it comes to the suitability of products sold to our senior citizens."

The violations were discovered as part of a market conduct examination begun by the Department in February of 2004. Physicians Mutual voluntarily agreed to immediately stop certain practices and voluntarily ceased making sales in Minnesota during the examination.

The company has also agreed to a restitution plan that involves a suitability review process aimed at making Minnesota consumers whole again if they feel they were sold insurance products in a deceptive manner. This process was also used by the Department in cases involving Conseco Insurance in 2006 and AmerUs Insurance in 2007.

Within 90 days, the company agrees to provide refunds to customers for excess premiums charged for Medicare supplement and long term care policies. It also agreed to contact all of their Minnesota long term care policy holders who have terminated their policies or let them lapse since January of 2001 to explain the suitability review process and offer the opportunity to have any complaints reviewed for possible restitution.

An independent third-party reviewer will be appointed by the company with the approval of the Department to review any complaints in which no restitution was provided or the restitution was less than what was requested by the consumer. The company will be obligated to abide by all decisions of the independent reviewer.

"The goal of this restitution plan is to restore Minnesota consumers to the financial situation they would be in if our insurance laws had been followed," added Wilson.

Today's action is part of an ongoing campaign to protect Minnesota consumers from deceptive sales practices, especially involving annuity sales to senior citizens. Other recent actions taken by the Department related to deceptive sales practices:

  • In June of 2007 the Department fined Amerus Insurance of Topeka, Kansas $1.4 million for deceptive sales practices and violations of Minnesota's insurance suitability laws. 

  • In April of 2006 the Department fined Conseco Insurance of Carmel, IN $2.5 million for deceptive sales practices and violations of Minnesota's suitability laws. 

  • In April of 2005, the Department fined Pacific Life Insurance Company of Newport Beach, CA $950,000 for deceptive sales practices and violations of Minnesota's suitability laws. 

  • In December of 2006, the Department fined Met Life Investors USA Insurance Company of Newport Beach, CA $250,000 for violating Minnesota insurance laws.  William Gerga, a licensed Minnesota insurance producer from White Bear Lake was also fined $10,000 for selling unapproved annuity contracts to approximately 50 Minnesota residents.