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MetLife settles Florida charges

Published Sep. 26, 2005

The insurer will pay $7.5-million to end a 2{-year investigation into allegations its agents misled customers.

Metropolitan Life Insurance Co. has agreed to pay $7.5-million to settle charges that its agents duped thousands of Floridians into buying more life insurance than they wanted.

The deal, the second-largest settlement with an insurer in state history, ends a 2{-year probe by Florida regulators into allegations that MetLife agents engaged in a practice widespread in the 1980s known as ""churning."

Churning occurs when an agent needlessly convinces a customer to buy a new, larger policy using the cash value of an existing policy to purchase it. When the cash value of the old policy is exhausted, the customer must pay the larger premium or let the policy lapse.

Prudential Life Insurance Co., John Hancock Mutual Life Insurance Co. and eight American General Corp. insurance companies have all previously settled churning charges with the state.

Prudential paid a record $15-million penalty to Florida in February 1997; John Hancock paid $6-million eight months later; and the American General companies paid $5.5-million in a deal reached in May.

In the latest settlement, MetLife denies it engaged in any illegal sales scheme, mirroring similar denials issued by the other companies.

Florida's action comes less than six months after MetLife, the country's second-largest life insurer, agreed to pay at least $1.7-billion to settle a national class-action suit over improper sales practices that had been mired in a Pittsburgh courtroom for more than four years.

About 7-million current and former customers who purchased insurance products from MetLife between 1982 and 1997 are eligible for class-action funds in that case.

The Florida probe, which began in May 1997, targeted the same 16-year period, examining records of some of the 433,000 MetLife insurance policies sold in Florida during that span.

Insurance Commissioner Bill Nelson said he will seek a state budget amendment to earmark most of the $7.5-million settlement to make more scholarships available at Florida colleges and universities.

Simultaneously, Florida regulators said they will work with MetLife to help victimized policyholders get reimbursed from the class-action pool of funds.

"We're going to make sure MetLife fairly compensates every Florida customer who was harmed," said Attorney General Bob Butterworth, who joined Nelson in announcing the settlement Thursday.

MetLife's Tampa office referred calls to corporate spokesman John Calagna in New York, who could not be reached late Thursday for comment.