DFS announces $6m settlement with Principal over annuity replacement violations

Written by Adam Cadle

02/11/2020

The New York State Department of Financial Services (DFS) superintendent Linda Lacewell has announced a settlement worth $6m with Principal Life Insurance Company for annuity replacement violations.

DFS’s investigation found that Principal failed to properly disclose to consumers income comparisons and suitability information, causing hundreds of consumers to exchange more financially favourable deferred annuities with less favourable immediate annuities. Many New York consumers received incomplete information regarding the replacement annuities, resulting in less long-term income. 

“The Department continues to protect vulnerable New Yorkers, including seniors as they save for retirement,” Superintendent Linda Lacewell said.

“Today’s settlement provides restitution to New York consumers who lost savings after being lured into disadvantageous annuities. This case serves as a reminder to New York’s life insurers that they must abide by our regulations and provide full disclosure, so New York consumers are able to invest their life savings wisely.  DFS will continue to enforce its regulations against practices that take advantage of consumers.”

The settlement is the result of DFS’s industry-wide investigation into deferred to immediate annuity replacement practices in New York State.  To date, the investigation has resulted in settlements with more than 10 carriers, totalling more than $12m in restitution and penalties.   

As a result of the settlement, hundreds of New York consumers will receive additional restitution for the remainder of their annuity contract terms. 

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