old woman concerned

Allianz will provide restitution to seniors and implement more stringent suitability processes.

Minnesota Attorney General Lori Swanson announced today the settlement of a lawsuit she brought in January against Allianz Life Insurance Company of North America for selling deferred annuities to Minnesota senior citizens without first determining whether the annuities were suitable investments for the seniors.

The lawsuit alleged that Allianz, headquartered in Minnesota, marketed and sold deferred annuities to seniors which restricted the seniors’ access to their assets in the annuity for as long as 15 years and in some cases misrepresented the terms of the annuity.

The Settlement Against Allianz

The settlement was approved today by Hennepin County District Court Judge Kevin S. Burke, the presiding judge in the litigation. This lawsuit entailed complex financial litigation, and Judge Burke invested a substantial amount of personal time and expertise in the litigation.

“This settlement provides Minnesota seniors who have had their funds locked up in long-term annuities the opportunity to ask for their money back,” said Swanson.

Restitution Process

The Attorney General and Allianz have agreed to a restitution process to review sales that may have been unsuitable or the result of misrepresentations. Minnesota consumers age 65 and older who purchased an Allianz deferred annuity between January 1, 2001 and the present will receive a letter from the Attorney General giving them the opportunity to submit a claim for a full refund without penalties. Requests for refunds will be “liberally construed” in favor of the consumer. If it is determined that the sale was unsuitable or based on misrepresentations, the consumer will be offered a refund of their premium, without a surrender charge, plus 4.15 percent interest.

Over 7,000 Minnesota seniors will get restitution offer letters from the Attorney General.

Future Underwriting

As part of the application process, Allianz will request and obtain additional information from consumers that is necessary to determine whether a deferred annuity is suitable for the particular consumer. The additional information includes whether the consumer has sufficient liquid assets and disposable income to pay for ongoing living expenses and emergencies without having access to all of the money that would be paid into the long-term deferred annuity.

Specific information to be requested by Allianz include the Seniors:

Monthly income Monthly living expenses Monthly disposable income Total liquid assets Percentage of liquid assets placed into the annuity Anticipated significant changes in household monthly income, living expenses, or liquid assets, such as a reduction in income caused by retirement or pension changes or by an increase in expenses such as housing, medical, nursing home, or assisted living expenses.

As part of the new suitability process, Allianz will also conduct a manual “elevated review” of annuity applications if a consumer is 65 years of age or older and the consumer has liquid assets, after purchase of the annuity, of less than or equal to $75,000; or the consumer anticipates a significant increase in living expenses or a significant reduction in net income or liquid assets during the annuity’s deferral or surrender charge period, whichever is longer; or the premium the consumer paid for the annuity exceeds 25 percent of the consumer’s net worth (excluding the consumer’s home); or the consumer’s annual income is less than or equal to $20,000; or the premium the consumer paid for the annuity is greater than four times the annual income of the consumer.

If an application is subject to manual elevated review, Allianz will not issue the policy unless Allianz determines and documents specific, objective evidence that clearly establishes that the sale is suitable for the consumer in light of his or her stated financial condition, needs and objectives. It is anticipated that the percentage of applications Allianz reviews under this elevated review process will be a sharp increase over the percentage of applications Allianz currently reviews manually.

Allianz will also pay the State $500,000 in fees and expenses.

“I credit Allianz CEO Gary Bhojwani for his personal involvement in settlement negotiations that resulted in this agreement. Mr. Bhojwani joined the company after our lawsuit was filed, and I give him credit for reaching a resolution of it,” said Swanson.

In April, the Attorney General filed a similar lawsuit against American Equity Investment Life Insurance Company alleging that it sold unsuitable annuities to senior citizens. That lawsuit remains pending in Hennepin County District Court. The Attorney General’s Office is investigating other insurance companies over similar practices.

Guiliano Law Group

If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.