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Allianz Life settles with state of annuity sales
Attorney General Lori Swanson has reached an out of court settlement with Allianz Life Insurance of North America, in a lawsuit over deferred annuities sold to thousands of seniors. "This settlement provides Minnesota seniors who've had their funds locked up in long-term annuities a chance to ask for their money back," Swanson told reporters. Swanson brought the lawsuit last January, just days after taking office as the State's new Attorney General. Allianz sold deferred annuity policies worth $325 million to 7,000 seniors, according to Swanson. The crux of the case was that some buyers weren't truly suitable customers because of their age and financial situations. In some cases, Swanson alleged, the seniors couldn't gain unrestricted access to their money until well past their life expectancies. Those who needed to withdraw money before the annuities fully matured had to pay substantial "surrender penalties." Leo Stulen of Hutchinson was among those clients who surrendered $6,000 when he withdrew money to buy a mobile home. He had placed $56,000 into an Allianz annuity product expecting to let it collect interest, but needed to use it when his wife encountered hip problems. "I'm very glad to hear I'm going to get my money back," the 79-year-old Stullen told KARE 11 today. He was among four Allianz annuity holders who attended the Attorney General's news conference. Stullen bought his annuities when he was 74, and would have needed to wait until age 89 to withdraw the full amount without penalty. Other customers on hand for the news conference would have been 99 and 100 when their policies matured fully. In the settlement Allianz agrees to provide restitution payments to those who paid surrender penalties. And any Minnesota customer age 65 and over who purchased an annuity plan since January 1st of 2001 can apply for a full refund without penalties. Swanson said if it is determined the sale was unsuitable or based on misrepresentations by an agent, the buyer will be offered a refund plus 4.15 percent interest. Allianz Life of North American, based in Golden Valley, denied wrongdoing in January when the suit was filed. The company pointed to a thorough "suitability" review process featuring a suitability form filed by the agents who sold the annuities. Last January the company issued a statement saying it has complied with all state laws and that fewer than one percent of its annuity customers had filed complaints. The Attorney General's lawsuit is one of seven such suits filed against Allianz. A class-action case involving bonuses settled out of court last week. According to the terms of the settlement Allianz admits no wrongdoing, and that's fine with the Attorney General. "If companies were forced to admit wrongdoing they'd have no reason to settle. They would just take the case to trial," Swanson said. She pointed out that several of the Allianz customers who filed complaints with the Attorney General and signed affidavits in support of the lawsuit have sense died. "We're losing some of our seniors already," Swanson remarked, arguing that it wouldn't serve them to wait for a trial to run its full course. In a statement issued to the news media this afternoon Allianz's President and CEO Gary Bhojwani said, ?The settlement process with Attorney General Swanson was a difficult one, but it soon became clear that the common ground we share is a sincere desire to protect the needs of consumers in the State of Minnesota." ?With this settlement, Allianz is taking yet another step to continue to earn the trust and confidence that our consumers place in us every day. I want to express my gratitude for the unwavering support of our 2,200 employees and our distribution customers as we continue to enhance our consumer safeguards and suitability practices.? Going forward Allianz agrees to change its procedure for weighing the suitability of plans for individual customers. Swanson said any customer over the age of 65 will automatically be red flagged in the Allianz system. Those cases will be reviewed to determine if the customer can afford to have his or her money tied up in a long-term deferred annuity. That will be made based on monthly income, living expenses and the customer's overall liquidity. Customers who won't have enough cash to live on once they sign up, or because of health could be facing major changes in expenses, would be deemed unsuitable for such a policy. As part of the settlement Allianze agreed to pay the state $500,000 in fees and expenses. Swanson thanked Allianz CEO Gary Bhojwani for helping bring the case to a conclusion, just nine months after it began. "I credit Gary Bhojwani for his involvement in the settlement negotiations," Swanson said. "He joined the company after our lawsuit was filed, and I give him credit for reaching a resolution of it."
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