The nation's insurance commissioners agreed Sunday that Metropolitan Life Insurance Co. should pay a record $20-million in fines for misleading customers nationwide in order to sell them life insurance.
At least $12.5-million of that should come in cash fines paid to virtually every state in the union, members of the National Association of Insurance Commissioners (NAIC) agreed. How the remainder will be paid is still being discussed.
The fines would be on top of as much as $76-million in refunds MetLife should have to pay to customers nationwide who may have been deceived into buying high-commission whole life insurance policies they were told were more lucrative retirement savings plans, the commissioners agreed.
"I think if you asked any of us what they thought, they would say what the company did was a totally unacceptable, horrendous act that hurt people who worked hard for their money and cared about their retirement," said Florida Insurance Commissioner Tom Gallagher.
Gallagher chairs a multistate panel of insurance regulators investigating MetLife. He formally proposed the $20-million fine at a NAIC meeting in Denver on Sunday, after presenting the findings of a five-month investigation into MetLife's sales practices. Gallagher had notified some members of the multistate panel of his fine proposal late last week.
The fines would be split between the states, based upon how many MetLife customers were illegally solicited.
As proposed, MetLife would pay Florida $2.2-million in fines _ the largest amount ever by an insurance company _ for misleading at least some of an estimated 10,172 MetLife whole life insurance policyholders. Florida would get the biggest settlement of any state. The money would eventually end up in the state's general revenue fund.
MetLife has not agreed to the settlement. Officials from the New York-based insurance company _ the nation's biggest in terms of outstanding policies _ are expected to meet with NAIC members today to discuss it.
In New York, MetLife spokesman Charles Sahner said Sunday the company thinks that $20-million is excessive, since it has offered refunds to any customer who was improperly solicited, and since it reorganized its management and fired managers involved with the illegal sales.
"We're going to study this proposal," Sahner said. "We want this thing to be resolved as quickly as possible."
If MetLife doesn't agree to the fines, states could individually levy fines against the company. Those fines could easily top $20-million, Gallagher warned.
Like other states, Florida also is planning other penalties against MetLife employees involved in the scandal, which has shaken the entire insurance industry.
Gallagher said he plans to discipline MetLife sales agents in Florida beginning later this week for using deceptive sales practices. On Sunday, he declined to say how many agents might be censured, or how.
Florida began independently investigating MetLife in August. The state's investigation originally surrounded MetLife's Southeast regional office in Tampa.
In the Tampa office's sales division, salespeople traveled nationwide, deceptively selling life insurance mainly to nurses and other health care professionals, the investigative report released Sunday confirmed.
The salespeople seldom told customers what they were buying was life insurance, saying instead that it was a retirement savings plan that offered good liquidity and high interest rates.
MetLife managers knew about the deceptive practices for some time, according to the investigative report, but did little about them.
Whole life insurance is generally considered a poor retirement investment and is designed largely for the beneficiaries of a policyholder after the policyholders' death. If a whole life policy is "cashed out" in its early years, an investor can lose all of the money he or she has put into it.
"You can cut what this is all about down to four words," Gallagher said Sunday.
"Truth in life insurance."