California Insurance Commissioner John Garamendi on Tuesday announced that the Prudential settlement provides that, at or before a customer requests information about employee benefits coverage, it will provide the customer with the base or standard commission to be paid.Also, Garamendi said, Prudential will provide the customer with an estimate of the amount of any contingent compensation expressed as a percentage of premiums paid and disclose all “Communication” and “Service Fees.” Prudential will also make information on its broker compensation practices publicly available on its Web site, including the new disclosure requirements required by the settlement.
“This settlement is recognition that brokers, agents and insurers owe their clients truth and honesty in their dealings and I encourage other carriers to follow this example,” said Garamendi, in a press release.
According to the news release, Prudential agreed to:
- provide oversight and training of its employees on compliance with the terms of the settlement agreement and ensure that the business reforms called for by the agreement are implemented and appropriate personnel are designated with responsibility to respond to customer inquiries concerning all broker compensation issues;
- continue to cooperate with Garamendi on his ongoing investigations and related proceedings and actions and provide an annual confirmation for three years concerning Prudential’s compliance with the settlement agreement;
- not enter into any financial relationships, including equity ownership and/or financing, with any brokers; and
- not sponsor broker production contests or similar programs which provide for compensation or other remuneration (such as trips, gifts, bonuses) to brokers.
The news release said Garamendi’s pending case, The People of the State of California by and through John Garamendi v. Universal Life Resources, Case No. GIC838913 (Cal. Super. Ct. San Diego) continues against defendants Metropolitan Life Insurance Company, Life Insurance Company of North America, Connecticut General Life Insurance, CIGNA Healthcare of California, Inc., CIGNA Dental Health of California, Inc., Hartford Financial Services Group Inc., Hartford Life and Accident Insurance Company, and Hartford Life Insurance Company.
Garamendi charged that the insurers had hid millions of dollars in secret commissions.
The California announcement came shortly after Prudential entered a $19 million settlement with New York Attorney General Eliot Spitzer, who also was investigating the Newark, New Jersey-based insurer’s compensation practices (See Prudential Agrees to Full Disclosure of Broker Compensation).The Garamendi settlement agreement is here.