Superintendent of Financial Services Linda A. Lacewell today announced that the Department of Financial Services (DFS) has fined American Progressive Life and Health Insurance Company of New York $260,000 for rescinding certain life insurance policies without the consent of policyholders.
“American Progressive took the power of choice from consumers into their own hands – an unacceptable and illegal course of action,” said Superintendent Lacewell. “We expect insurers to play by the rules and the Department will take action to ensure they do.”
A DFS investigation resulting from a consumer complaint found that from 2010 to 2019 American Progressive rescinded reduced paid-up life insurance policies with a cash value of $500 or less and paid the cash value to 260 policyholders without the consent of the policyholders, in violation of New York Insurance Law. The identified policies originally had a total face amount of $2,333,438 and total reduced paid-up death benefits of $32,945.
Under today’s order, American Progressive will present a remediation for restitution plan to policyholders or their beneficiaries for each violation. Under the plan, American Progressive will identify policies that it rescinded without consent of the policyholders. The company will give those policyholders the option of choosing to put their policies back in force without seeking to recoup any funds paid out as part of the unauthorized rescissions of the policies. As an alternative, consumers may receive an additional payment reflecting the difference between the surrender value previously paid and the reduced paid-up death benefit.
A copy of the consent order (https://www.dfs.ny.gov/system/files/documents/2019/09/ea190917_american_progressive.pdf) can be found on the DFS website.