The New York State Department of Financial Services ("DFS") has fined American Progressive Life and Health Insurance Company of New York $260,000 after finding that it rescinded certain life insurance policies without the consent of policyholders.
"American Progressive took the power of choice from consumers into their own hands – an unacceptable and illegal course of action," Linda A. Lacewell, the DFS superintendent, said in a prepared statement. "We expect insurers to play by the rules and the department will take action to ensure they do."
The DFS said that it began an investigation after receiving a consumer complaint and that it found that from 2010 to 2019 American Progressive rescinded reduced paid-up life insurance policies with a cash value of $500 or less and paid the cash value to 260 policyholders without the consent of the policyholders, in violation of New York Insurance Law. The identified policies originally had a total face amount of $2,333,438 and total reduced paid-up death benefits of $32,945.
Under the DFS order, American Progressive will present a remediation for restitution plan to policyholders or their beneficiaries for each violation. Under the plan, American Progressive will identify policies that it rescinded without consent of the policyholders. The company will give those policyholders the option of choosing to put their policies back in force without seeking to recoup any funds paid out as part of the unauthorized rescissions of the policies. As an alternative, consumers may receive an additional payment reflecting the difference between the surrender value previously paid and the reduced paid-up death benefit, according to the DFS.
Learn more: DFS American Progressive Consent Order.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].