Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, August 15, 1995 TAG: 9508150064
SECTION: BUSINESS PAGE: B5 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: NEW YORK LENGTH: Medium
The nation's third-largest life insurer said it will make the payment by compensating policyholders with $250 million in low-interest loans and replacement policies and annuities.
About 3 million policyholders nationwide who bought whole and universal life insurance from New York Life between 1982 and 1994 are eligible for the benefits.
New York Life is the latest insurer to settle charges of misleading life insurance policyholders. Metropolitan Life Insurance Co. also has agreed to pay millions to customers in several states.
New York Life did not admit any wrongdoing in settling the case, said Harry G. Hohn, chairman and chief executive officer.
``The challenge was to resolve an issue faced by many companies in a way that is fair and helpful for our policy owners while not harming the financial strength of the company,'' Hohn said.
Many elderly people had bought the policies, which use dividends to pay off premiums. Based on New York Life's assessment of dividend payouts, they believed that after about seven to 10 years they would no longer have to pay premiums.
But when New York Life's dividends fell after interest rates declined in the late 1980s and early 1990s, policyholders discovered they still owed premium payments.
Some customers also said that agents induced them to trade in their existing policies for new ones to get a commission and misled them into thinking that the policies were savings vehicles.
Hohn said the settlement was an acknowledgment that there was a gap between the dividend picture at the time the policies were sold and what it turned out to be after the company was hit by changes in interest rates and higher taxes.
The settlement has yet to be cleared by the New York Supreme Court, which has scheduled a hearing for Nov. 15.
by CNB