ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Friday, February 14, 1997 TAG: 9702140058
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
Prudential Insurance Co. of America will pay $384,200 to the state to settle alleged violations of Virginia insurance law.
The State Corporation Commission said Thursday that it had accepted Prudential's settlement offer, and will conclude negotiations with the nation's largest seller of life insurance. It said that Newark, N.J.-based Prudential had acknowledged that its sales practices may have been, in come cases, misleading.
Prudential estimated that as many as 175,000 Virginians had bought individual policies between 1982 and 1995. The SCC said some of these policyholders may have been misled during the course of the sale.
Prudential provides a toll-free telephone number - (800)736-8913 - for policyholders who have questions about the settlement.
Also, the company's Virginia customers will receive a letter within three weeks from Alfred Gross, commissioner of insurance, about Prudential's remediation program, as well as a detailed information packet.
The commission said misrepresentations by Prudential agents may have occurred in three main areas:
* Improper financed-insurance sales, a practice known as churning, in which one policy's built-up value is used to finance another policy.
* Improper representations in sales involving abbreviated payment plans, also known as vanishing premium sales.
* Life insurance improperly sold primarily as an investment rather than as insurance against the death of an individual.
Other improper practices may have been used, the SCC said.
The settlement follows the terms of a multi-state, class-action settlement now pending before a federal district court in New Jersey.
If that settlement is approved by the court, Prudential will have to pay at least $410million and perhaps $1billion to policyholders throughout the United States. Some policyholders may get cash. Others may be eligible to apply for premium loans from Prudential or to buy more life insurance or annuities under favorable terms.
The settlement with Virginia ensures that Virginia policyholders will be eligible for similar relief if another state negotiates more favorable terms.
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