News & Publications
June 25, 2008
by Josh Johanningmeier
The OCI, the state agency responsible for policing those who sell insurance products in Wisconsin, forbids the sale of insurance products, including annuities, that are not "suitable" for the purchasing customer. Compliance with this law can be challenging because it requires insurers and agents to consider each customer's unique circumstances and make certain that the insurance product to be sold is appropriate, based on those circumstances, before completing the sale. Once complete, such sales are subject to critical hindsight of the company or agent’s suitability determinations.
According to the OCI, Penn Life sold annuities to approximately 2,200 Wisconsin purchasers between 2000 and 2007, most of whom were senior citizens. The OCI investigated Penn Life and its principal Wisconsin insurance agency, Premier Marketing Group, after receiving consumer complaints regarding the suitability of Penn Life annuity and asset enhancer products.
In addition to the forfeiture, Penn Life agreed to suspend annuity sales in Wisconsin for four years. Penn Life also agreed to implement a comprehensive prospective compliance program, an overhaul of its product offerings and marketing practices and to allow an independent firm to review the thousands of annuity and asset enhancer purchases at issue in the investigation for possible remediation for consumers who seek it. The remediation component of the settlement could significantly increase Penn Life's liabilities to a level well beyond the record forfeiture amount, because it could require Penn Life to grant refunds to hundreds, if not thousands, of policyholders.
Insurers and agents alike—particularly those engaged in the sale of annuities and asset enhancers—should consider the Penn Life settlement a strong reminder to review their sales practices, training programs and suitability guidelines to ensure compliance with Wisconsin's suitability laws.
Josh Johanningmeier is a shareholder in Godfrey & Kahn’s Insurance Practice Group, where his practice includes representation of insurance companies and agents before state regulators, including the Wisconsin Office of the Commissioner of Insurance, as well as litigation and consulting regarding insurance company insolvency and insurance guaranty funds. If you have questions, please contact Josh at 608-284-2637, or email him at email@example.com.