THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, July 11, 1996 TAG: 9607110381
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: 67 lines
After a lengthy investigation by insurance regulators, Prudential Insurance Co. of America has agreed to reimburse certain customers for losses they suffered on their life-insurance policies.
A task force of regulators from 30 states criticized Prudential for allowing widespread sales abuses by its agents. These included persuading customers to use the accumulated cash value of their policies to pay for new, more expensive policies. Prudential agents often failed to inform these customers that they might have to come up with extra money, regulators said.
Prudential, the nation's largest life insurer, also agreed to pay $35 million in fines as part of its settlement with insurance regulators.
Prudential and company spokesman Bob DeFillippo provided some additional details Wednesday on the reimbursement program that will be offered to its policyholders:
Who will be eligible for the reimbursement program?
People who bought whole-life policies from Prudential between 1982 and Dec. 31, 1995. During these years, Prudential sold 10.7 million whole-life policies, including 105,000 in Virginia.
Will the program cover any other products, such as term life insurance or annuities?
No.
What information will Prudential distribute to policyholders?
Beginning in August, the company will send out brochures describing the program's options and the forms necessary to participate.
What are the options?
One is a no-fault program that will offer certain customers the opportunity to buy new policies. The new policies will have a death benefit or an annuity enhanced at Prudential's expense. Loans will also be made available to certain customers to pay the premiums on their policies.
What other options will be available?
Policyholders who think they lost money on their policies will be able to file claims to recover those losses through an arbitration program. The program will be operated by a third party and will be supervised by state insurance regulators. A policyholder's claim will be evaluated on the basis of evidence that he or she provides to the arbitration panel.
If a policyholder uses the arbitration program, what kind of evidence will be necessary to indicate that losses were the result of misleading information?
It can be any kind of paperwork provided at the time of the sale or that provided a sense that they felt they were misled.
Will there be an appeals process?
Yes. A policyholder who rejects an offer will have the opportunity to submit a written statement and to appear at a hearing to explain why he or she disagrees with the claim evaluation or remedy.
If a policyholder uses the reimbursement program, can he or she also file a lawsuit or participate in a suit against Prudential?
No. By participating in the program, a policyholder gives up the right to pursue Prudential in court.
How will the amount of restitution be determined?
Prudential will draw on its records for facts related to the claims. Policyholders will receive essentially what they were promised, Prudential said.
How much is Prudential likely to pay in this reimbursement program?
Some estimates have put the amount as high as $1.2 billion. But the total cost won't be known until the process is completed.
Where can policyholders get additional information?
Prudential has set up a toll-free number to handle inquiries: 800-736-8913. The office is open from 8 a.m. to 5 p.m. on weekdays.
KEYWORDS: PRUDENTIAL LIFE INSURANCE SETTLEMENT by CNB