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Commerce Department Settlements on Life Insurance Accounts Top $1.1 Million and Add Consumer-Protection Changes

Recent actions against Lincoln National & Northwestern Mutual latest life insurers fined due to alleged misconduct with Retained Asset Accounts

May 17, 2013

For Immediate Release:

SAINT PAUL, MN – The Minnesota Department of Commerce recently took action against Lincoln National Life Insurance Company and Northwestern Mutual Life Insurance Company due to alleged current or former practices that automatically enrolled consumers into retained asset accounts – without providing beneficiaries with the option to decide whether they wanted life insurance proceeds placed in such accounts which may not have been suitable for the beneficiary or paid in one lump sum cash payment upon the death of policy holder.

“These settlements correct the improper practice of enrolling life-insurance beneficiaries into so-called retained asset accounts without sufficient disclosures and giving beneficiaries the options they have come to expect on the passing of a family member,” said Commissioner Mike Rothman.  “Beneficiaries in Minnesota will get better information to help them choose either a traditional lump-sum payment or investing these funds after fair disclosures about account information such as interest rates offered by insurers in these retained asset accounts.”

The actions against Lincoln National and Northwestern Mutual are part of a larger group of ongoing market conduct examinations concerning multiple life insurance companies ordered by the Commerce Department looking at whether upon the death of policy holders the policies were handled properly. This included the practice of unwittingly enrolling beneficiaries in retained asset accounts, which allowed life insurance companies to hold onto large sums of life insurance proceeds in accounts that beneficiaries could access, rather than one lump sum cash payment.

The Department also has taken action against Prudential, MetLife, John Hancock, Jackson National, Transamerica and ING for allegedly engaging in similar practices of inappropriately enrolling beneficiaries into retained asset accounts after they have filed life insurance claims.

Following detailed examinations, the Commerce Department has ordered both Lincoln National and Northwestern Mutual to pay a civil penalty of $150,000, modify its business practice to establish, or continue to offer beneficiaries a lump-sum cash payment as the default option, and cease paying death benefits by way of a retained asset account unless the option was affirmatively chosen.  In total, the Department has received over $1.1 million in civil penalties from life insurers that had engaged in this practice – Prudential, MetLife, John Hancock, and ING each paid $200,000 in civil penalties alone.

According to Minnesota law, life insurance companies are required to provide clear, consumer-friendly instructions for obtaining payments under life insurance policies and options should be a suitable arrangement for the beneficiary.  The Department’s investigation, however, unearthed evidence that these insurance companies had used the automatic default options to automatically enroll consumers into retained asset accounts, which may have resulted in unsuitable arrangements for beneficiaries depending on the circumstances.

The Commerce Department encourages all Minnesotans to know your rights and ask questions. If you have been unknowingly or unwillingly enrolled in a retained asset account, and would rather receive a lump sum cash payment, the Minnesota Department of Commerce encourages you to contact your insurer directly. If you feel you may have been subject to confusing or deceptive claims practices following the death of a loved one, contact the Commerce Department’s Consumer Response Team to file a complaint by email at or by phone at (651) 296-2488.