Met Life to settle suits over its sales practices

7 million will share $1.7 billion settlement of class action suits

August 19, 1999|By BLOOMBERG NEWS

NEW YORK -- Metropolitan Life Insurance Co. has agreed to a $1.7 billion settlement of class action lawsuits by policyholders claiming that they were deceived by the sales practices of the second-largest U.S. life insurer.

The New York-based company, a mutual insurer owned by its policyholders, said yesterday that it expects the settlement to cover three class action suits and "dozens" of other actions.

The settlements were reached with plaintiffs' lawyers and affect 7 million current and former policyholders.

Settlement of the claims, alleging that Met Life agents sold life insurance they misrepresented as retirement or savings plans, comes as the insurer prepares to convert to a publicly traded company, perhaps in the next six to 12 months.

"It's an attempt to be comprehensive and put the entire sales-practices issue to rest," said spokesman Kevin Foley.

Other companies, including Prudential Insurance Co. of America, the largest U.S. life insurer, and New York Life Insurance Co., which is No. 4, have settled similar suits in recent years.

Plaintiffs in those cases alleged that the insurers' agents tried to boost commissions by "churning," or persuading customers to buy new coverage paid for with their old policies.

Met Life didn't acknowledge any wrongdoing, but said its settlement will be brought before a judge Dec. 2 for approval. The insurer will send letters explaining the offer to policyholders and annuity contract holders Aug. 27. Met Life has about 9 million individual policyholders.

Met Life agreed in November to pay a $25 million civil penalty to settle a federal investigation of its sales practices.

In October, it agreed to pay a $1 million fine to settle a Connecticut state inquiry, and in 1994 it paid $109.5 million to a nationwide group of state insurance regulators to settle their inquiry.

Among the abuses Met Life and other insurers were accused of was promising customers that they would not have to pay premiums once their policy values reached a certain level. But that assumption depended on high interest rates, and falling rates over recent years meant that policy values did not appreciate sufficiently to cover the premiums.

Policyholders can learn more about the settlement by calling 1-800-843-4790.

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