News: 2010 Press Release
For Release: December 21, 2010
Media Calls Only: 916-492-3566
Insurance Commissioner Poizner Fines Trans World Assurance Company $275,000 For Selling Banned Insurance Policies to G.I.'S
Trans World fined by other states
Insurance Commissioner Steve Poizner today announced a $275,000 settlement agreement with Trans World Assurance Company for violating regulations designed to prevent insurers from taking advantage of active duty service members in the United States Armed Forces (G.I.'s). Trans World's life insurance policies automatically deducted insurance premiums from a savings account component of the policies which promised high returns. These types of deductions resulted in abuses across the country and they are specifically prohibited.
"Our regulations prohibit predatory, deceptive or misleading practices by sophisticated insurers that seek to drain G.I.'s savings accounts to pay insurance premiums. Trans World made a business of selling policies that took unfair advantage of service members and it continued selling those policies even after Congress urged a review of the practice and after California and most states banned it," said Poizner. "Abusing the trust that these young men and women put in Trans World to sell a valuable and legal insurance policy is unconscionable and I have made it my mission to protect service members who often pay the ultimate price for their country."
Under the Department of Insurance's Military Sales Regulations, insurers cannot sell life insurance policies that have savings accounts called "side funds" from which premiums are automatically paid. A United States Government Accountability Office study found that insurers were depleting the savings accounts by paying premium to themselves, even long after the G.I.'s left the Armed Forces and could not be located. The Military Sales Regulations also prohibit insurers from including unfair and abusive terms in the side funds that calculate interest on less than a daily basis on the money in the savings account and they prohibit assessing penalties for so-called "early withdrawals." After February 2008, Trans Word continued to sell policies after the Regulations were adopted that deducted premiums, assessed penalties, and paid interest, in brazen disregard of the law.
Under the settlement, Trans World has agreed to only sell policies that comply with the law to service members, and it will repay all premiums deducted from savings after the Military Sales Regulations became effective. Trans World will also recalculate and pay interest as required by law and it will repay withdrawal charges. Trans World was also fined $214,000 by the state of Georgia and $175,000 by the state of Florida. The settlement allowed Trans World to avoid the suspension and/or revocation of its certification and licenses to sell insurance products in California.
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