March 02, 2021
DFS SUPERINTENDENT LACEWELL ANNOUNCES NEW YORK LIFE INSURANCE & ANNUITY CORPORATION TO PAY $10.9 MILLION FOR DEFERRED TO IMMEDIATE ANNUITY REPLACEMENT VIOLATIONS
NYLIAC to Pay $5.4 Million in Restitution to New York State Consumers, in addition to $5.5 Million in Penalties
DFS’ Ongoing Industry-Wide Investigation Continues to Protect Consumers
Superintendent of Financial Services Linda A. Lacewell announced today that the Department of Financial Services (DFS) has entered into a consent order with New York Life Insurance & Annuity Corporation (“NYLIAC”) for violations of New York Insurance regulations in deferred to immediate annuity replacement transactions. NYLIAC will pay $5.4 million in restitution to New York State consumers, in addition to $5,529,000 in penalties.
“The Department remains committed to protecting New York’s families, especially our vulnerable seniors, from being misled as they seek to secure their retirement income during these challenging times,” said Superintendent Lacewell. “Today’s settlement will deliver significant monetary restitution and relief to consumers during the ongoing pandemic and serves as a reminder to New York’s life insurers that they must put consumers’ best interests first and comply with DFS regulations.”
DFS' investigation found that NYLIAC failed to properly disclose to consumers income comparisons and suitability information, causing consumers to exchange more financially favorable deferred annuities with immediate annuities. Many New York consumers received incomplete information regarding the replacement annuities, resulting in less income for identical or substantially similar payout options. DFS issued a final regulation that ensures recommendations related to life insurance and annuities are in the best interest of the consumer and appropriately address the insurance needs and financial objectives of the consumer at the time of the transaction.
Today’s settlement is the result of DFS’ ongoing industry-wide investigation into deferred to immediate annuity replacement practices in New York State. To date, the investigation has resulted in settlements with twelve life insurance companies, totaling $23 million in restitution and penalties.
As a result of the settlement, hundreds of New York consumers will receive additional restitution going forward in the form of higher monthly payout amounts for the remainder of their contract terms. NYLIAC has agreed to take corrective actions, including revising its disclosure statements to include side-by-side monthly income comparison information and revising its disclosure, suitability, and training procedures to comply with regulations.
Annuities are contracts between life insurance companies and consumers that provide guaranteed payments for the remainder of an individual’s lifetime or for a specified period. Immediate annuities provide periodic income payments that begin within thirteen months after the annuity is issued, while deferred annuities allow consumers to earn interest on their premium before receiving payments at a future date. Annuitization is the conversion of the amount of a deferred annuity into a series of payments to the annuitant. Recommending that consumers replace existing deferred annuities with immediate annuities without proper disclosures may cost consumers substantial lifetime income.
DFS’ industry-wide investigation remains ongoing.