The New York State Department of Financial Services (DFS) entered into a consent order with Nationwide for those regulation violations, Adrienne Harris, superintendent of financial services announced May 20. Under the order, Nationwide will pay about $3.4 million in restitution to New York State consumers, along with $2.24 million in penalties. Impacted consumers will also […]
The New York State Department of Financial Services (DFS) entered into a consent order with Nationwide for those regulation violations, Adrienne Harris, superintendent of financial services announced May 20.
Under the order, Nationwide will pay about $3.4 million in restitution to New York State consumers, along with $2.24 million in penalties. Impacted consumers will also receive higher monthly payouts for the remainder of their contract terms, the state DFS said.
Columbus, Ohio–based Nationwide has also 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 New York regulations, the department added.
About the investigation
The DFS investigation found that Nationwide “failed to properly disclose” to consumers income comparisons and suitability information, causing consumers to exchange more financially favorable deferred annuities with immediate annuities.
Hundreds of New York consumers — primarily elderly individuals — received incomplete information regarding the replacement annuities, resulting in less income for identical or substantially similar payout options.
“The Department is committed to protecting New Yorkers, especially vulnerable seniors, from illegal and harmful insurance practices, including these kinds of annuity-replacement transactions,” Harris said. “Today’s settlement puts money back in the pockets of impacted consumers, contributing to greater financial stability and protection for individuals and their families.”
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, DFS explained. Immediate annuities provide periodic income payments that begin within 13 months after the annuity is issued, while deferred annuities allow consumers to earn interest on their premium before receiving payments at a future date. Recommending that consumers replace existing deferred annuities with immediate annuities without proper disclosures “may cost consumers substantial lifetime income,” the DFS noted.
The DFS says the settlement is the latest result in its industry-wide investigation into deferred to immediate annuity-replacement practices in New York state. To date, the industry-wide investigation has resulted in settlements with 13 life-insurance companies, totaling about $29 million in restitution and penalties.
A copy of the consent order is available on the DFS website: https://www.dfs.ny.gov/system/files/documents/2022/05/ea20220519_nationwide_life.pdf
Nationwide emailed the following statement to CNYBJ in response to the DFS matter: “Nationwide remains committed to protecting people, businesses and futures with extraordinary care. We continue to urge the NYDFS to focus on promoting clearly articulated regulatory expectations for all industry participants in a manner that protects consumers while concurrently protecting their access to affordable and innovative product offerings. We will continue to work with NYDFS to further develop and maintain clearly defined standards as it relates to transactions that may involve the replacement of an existing annuity. We are pleased to put this matter behind us.”