1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
(651) 296-3353
(800) 657-3787
TTY:(651) 297-7206
TTY:(800) 366-4812
Monday, October 8, 2007
Attorney General Lori Swanson Settles Suit Against Allianz
Allianz will provide restitution to seniors and implement more stringent suitability processes
Minnesota Attorney General Lori Swanson announced today the settlement of a lawsuit she brought in January against Allianz Life Insurance Company of North America for selling deferred annuities to Minnesota senior citizens without first determining whether the annuities were suitable investments for the seniors.
The lawsuit alleged that Allianz, headquartered in Minnesota, marketed and sold deferred annuities to seniors which restricted the seniors’ access to their assets in the annuity for as long as 15 years and in some cases misrepresented the terms of the annuity.
The settlement was approved today by Hennepin County District Court Judge Kevin S. Burke, the presiding judge in the litigation. This lawsuit entailed complex financial litigation, and Judge Burke invested a substantial amount of personal time and expertise in the litigation.
“This settlement provides Minnesota seniors who have had their funds locked up in long-term annuities the opportunity to ask for their money back,” said Swanson.
Restitution Process. The Attorney General and Allianz have agreed to a restitution process to review sales that may have been unsuitable or the result of misrepresentations. Minnesota consumers age 65 and older who purchased an Allianz deferred annuity between January 1, 2001 and the present will receive a letter from the Attorney General giving them the opportunity to submit a claim for a full refund without penalties. Requests for refunds will be “liberally construed” in favor of the consumer. If it is determined that the sale was unsuitable or based on misrepresentations, the consumer will be offered a refund of their premium, without a surrender charge, plus 4.15 percent interest.
Over 7,000 Minnesota seniors will get restitution offer letters from the Attorney General.
Future Underwriting. As part of the application process, Allianz will request and obtain additional information from consumers that is necessary to determine whether a deferred annuity is suitable for the particular consumer. The additional information includes whether the consumer has sufficient liquid assets and disposable income to pay for ongoing living expenses and emergencies without having access to all of the money that would be paid into the long-term deferred annuity.
Specific information to be requested by Allianz include the senior’s:
- Monthly income
- Monthly living expenses
- Monthly disposable income
- Total liquid assets
- Percentage of liquid assets placed into the annuity
- Anticipated significant changes in household monthly income, living expenses, or liquid assets, such as a reduction in income caused by retirement or pension changes or by an increase in expenses such as housing, medical, nursing home, or assisted living expenses.
As part of the new suitability process, Allianz will also conduct a manual “elevated review” of annuity applications if a consumer is 65 years of age or older and:
- the consumer has liquid assets, after purchase of the annuity, of less than or equal to $75,000; or
- the consumer anticipates a significant increase in living expenses or a significant reduction in net income or liquid assets during the annuity’s deferral or surrender charge period, whichever is longer; or
- the premium the consumer paid for the annuity exceeds 25 percent of the consumer’s net worth (excluding the consumer’s home); or
- the consumer’s annual income is less than or equal to $20,000; or
- the premium the consumer paid for the annuity is greater than four times the annual income of the consumer.
If an application is subject to manual elevated review, Allianz will not issue the policy unless Allianz determines and documents specific, objective evidence that clearly establishes that the sale is suitable for the consumer in light of his or her stated financial condition, needs and objectives. It is anticipated that the percentage of applications Allianz reviews under this elevated review process will be a sharp increase over the percentage of applications Allianz currently reviews manually.
Allianz will also pay the State $500,000 in fees and expenses.
“I credit Allianz CEO Gary Bhojwani for his personal involvement in settlement negotiations that resulted in this agreement. Mr. Bhojwani joined the company after our lawsuit was filed, and I give him credit for reaching a resolution of it,” said Swanson.
In April, the Attorney General filed a similar lawsuit against American Equity Investment Life Insurance Company alleging that it sold unsuitable annuities to senior citizens. That lawsuit remains pending in Hennepin County District Court. The Attorney General’s Office is investigating other insurance companies over similar practices.
People who have questions about the settlement should contact the Minnesota Attorney General’s Office at 651-296-3353 or 1-800-657-3787. Consumers with complaints against Allianz or another company may also download a Consumer Complaint Form by clicking here and may return the completed form to the Attorney General’s Office at: 1400 Bremer Tower, 445 Minnesota Street, St. Paul, MN 55101-2131.