US-based insurance firm MetLife will hand over $19.75m (£15m, €17.3m) in penalties to New York’s Department of Financial Services (DFS) after it failed to pay pensions to over 13,000 people.
As part of a DFS order, MetLife will also pay benefits to policyholders in New York and elsewhere totalling more than $189m, of which $123m has already paid.
“[This] action is a victory for policyholders, whose benefits were not paid due to MetLife’s failures, with the department taking the necessary action to protect consumers,” Maria Vullo, financial services superintendent at DFS said.
“The restitution and other corrective actions mandated under this consent order will ensure that consumers are paid the benefits to which they are entitled and that an appropriate fine is paid and procedures put in place to prevent this from happening again.”
Violations
Within the order, MetLife was cited for violations dating from 1992 to 2017, including:
- Failure to adequately search for group annuity certificate holders to whom it owed pension benefits and perform a cross-check against the Social Security Death Master File for group annuitants where a social security number was missing, or a number was invalid;
- Failure to make “reasonable efforts” to confirm the death of an insured and timely commence outreach to beneficiaries where it did not have specific information in its administrative systems and to research and timely commence outreach where certain variations of an insured’s information existed in its administrative systems; and
- Failure to ensure that variable annuity replacement disclosure statements were accurate and compliant with the law and to present consumers with an accurate comparison of the fees and expenses between existing and proposed variable annuity contracts.
Penalties
In addition to the benefits that have already been paid during the course of the DFS examination, MetLife is projected to make the following compensation to consumers:
- $63m set aside for expected death claims based on a Social Security Death Master File process that the firm will use to identify life insurance and annuity contract holders who have died or where beneficiaries are unaware that they are entitled to benefits;
- $1.85m in monthly payments to consumers as the company completes a group annuity remediation process; and
- $1.5m in compensation to consumers whom the insurer failed to provide with accurate comparisons of fees and expenses when transferring from an existing to a new variable annuity contract.
Corrective measures
In addition to the fine and restitution, MetLife must take the following corrective measures:
- Establish and maintain full statutory reserves for all group pension certificate holders;
- Pay retroactive benefits with interest to already retired group certificate holders or their surviving beneficiaries; and
- Send letters to all group annuity certificate holders no later than five years prior to the normal retirement date.
The order also requires MetLife to hire a third-party servicer that specialises in locating beneficiaries who are due pension benefits and have not been paid.
The firm will be responsible for paying all expenses incurred by the third-party servicer.
