Metropolitan Life Insurance Co. agents misled customers across the nation, convincing them to buy millions of dollars worth of high-commission life insurance policies they didn't want.
Now, it looks like the insurance giant is going to have to pay millions for its indiscretions.
Florida Insurance Commissioner Tom Gallagher is proposing an unprecedented $20-million in fines against MetLife for selling whole-life insurance disguised as retirement plans in all 50 states and the District of Columbia.
The fines are on top of an estimated $48-million or more the company expects to spend on refunds to 60,000 customers who may have been deceived.
"The MetLife sales abuses constitute the largest life-insurance market-practice deception that Florida has ever detected," said Jill Chamberlin, spokeswoman for Gallagher's office. "It's a very serious matter."
The proposed fines come after the conclusion of a Florida investigation into MetLife's sales practices nationwide.
The inquiry began in August and originally focused on the company's Tampa regional sales office. MetLife salespeople in the Tampa office traveled nationwide, deceptively pitching life insurance to nurses and other health care professionals, including many who already had plenty of insurance.
Whole-life insurance is generally considered less-attractive than other types of investments when used as a retirement plan. But life insurance is very lucrative to salespeople, since their commissions are substantially higher than those on sales of other investment products.
By disguising life insurance policies as other investments _ like retirement plans _ MetLife salespeople could garner big salaries and make lots of sales.
Gallagher, chairman of a multi-state task force now investigating MetLife, is planning to present the proposal at a meeting of the National Association of Insurance Commissioners in Denver on Sunday.
As proposed, the fines would be split among all states and the District of Columbia and would be determined based on the number of policyholders who were duped by the company in each state. Florida would receive the biggest share _ $4.3-million. New York would get $2.6-million and Illinois would get $1.35 million.
At MetLife's New York headquarters, company spokesman Charles Sahner said fines of $20-million would be excessive, especially since the company has offered customer refunds, reorganized its administration and fired key managers in Tampa and elsewhere.
"We expect some fines to be involved, but I think (regulators) have to keep sight of the fact that it's important for them to swiftly protect the public, not see who can levy the biggest fine," Sahner said.
Sahner said a large fine also could hamper the company's ability to make promised refunds to customers.
MetLife is the nation's biggest life insurance company in terms of policies in force. Since it has total assets of $150-billion, it would take much more than $20-million in fines to hurt it financially.
"You've got to remember the size of the company," said Joe Belth, a well-known insurance industry watchdog and professor emeritus of insurance at Indiana University. "I'm not saying that $20-million is petty cash . . . but they can handle it."
Regardless of what members of the insurance commissioners' group decide is a fitting fine, MetLife still may face other sanctions from some states.
In Texas, Insurance Commissioner J. Robert Hunter said he thinks Florida's findings underestimate the number of customers MetLife agents misled in Texas. Florida's findings indicate that 3,000 Texas customers were duped, according to Hunter. He thinks 100,000 were at least approached using improper practices.
"We're not going to stand in the way of any settlement . . . but we're not going to say that's it, either," Hunter said.
Florida's Insurance Department first began investigating MetLife's Tampa sales office in August, after two former Tampa employees sued the company and complained they were fired after trying to stop the improper sales practices. Other ex-employees later filed so-called "whistle-blower" suits, all of which MetLife settled out of court late last year.