Met Life will offer refunds to up to 45,000

December 28, 1993|By New York Times News Service

Metropolitan Life Insurance Co., its reputation tarnished by improper sales activities, said yesterday that it would offer refunds to customers who were misled in purchases of life insurance policies since 1990.

The company also said it had dismissed or forced into retirement seven executives, including its highest-paid salesman.

The company's problems resulted from sales literature that promoted some insurance policies as savings and investment plans instead of forthrightly labeling them as life insurance.

The company's office in Tampa, Fla., was the source of most of the misleading literature, but a few other offices around the country also became involved.

Metropolitan said yesterday that it would offer refunds to 30,000 to 45,000 customers who were misled by agents on policies bought since 1990 or who received inaccurate sales literature. It expects 12,000 to 15,000 of those people to accept refunds totaling $20 million to $30 million.

Earlier this year, the company offered refunds only for policies sold through the Tampa office. So far, the company has paid about $11 million to 6,000 of the 15,000 Tampa customers who bought policies since 1990.

Metropolitan, one of the nation's largest life insurers, with 25 million customers, also said it had reorganized its internal policing procedures.

A newly organized compliance department, which will report to the chairman, will be responsible for making sure the company's rules are followed, as well as for improving the training and sales practices of the company's 13,000 sales representatives.

The sales literature used by the Tampa office was not approved by Metropolitan's headquarters staff, as company rules require.

Although there was nothing wrong with the life insurance policies sold by the Tampa office, they were not fairly described to customers, many of whom were surprised to learn they could not get their money back as they expected, investigators for the Florida Insurance Department said.

The Tampa office mailed 20 million pieces of inaccurate sales literature to individuals in 37 states, Florida officials said.

While the $20 million to $30 million in refunds will reduce the money available for dividend payments to policyholders of Metropolitan Life, who are the owners of the mutual insurance company, they will not shake the financial strength of the company, which has about $8 billion of capital.

Tom Gallagher, the Florida insurance commissioner, who heads a committee of state commissioners formed this month to coordinate their Metropolitan Life inquiries, issued a statement calling the company's actions "an appropriate response."

But he added that Florida would continue its investigation and decide later what regulatory action is required.

Metropolitan Life said it was not the subject of any investigation by federal law enforcement agencies.

Harry P. Kamen, who became Metropolitan Life's chairman in April in a management succession that was unrelated to the problems in the Tampa office, said yesterday that many of the problems were a result of moves in the 1970s to decentralize control of day-to-day operations and give more control to regional executives.

In practice, the decentralization meant that some executives began to flout some company rules, like those requiring headquarters approval of all sales brochures and other literature shown to clients.

Company audits spotted the problem, but when regional executives told auditors that the problem had been resolved, "the auditors just went away," Mr. Kamen said.

Metropolitan will move back toward more central control through the training of new employees, he said, in the course of the company's regularly substantial turnover.

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