ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, January 4, 1996 TAG: 9601040069
SECTION: BUSINESS PAGE: B7 EDITION: METRO
SOURCE: The New York Times
JOHN HANCOCK is just one of several insurance companies accused of misleading sales practices across the country, investigators say.
John Hancock Mutual Life Insurance Co. has paid a $1 million fine to the New York State Insurance Department for a variety of improper advertisements and sales practices, the insurance department said Wednesday.
The fine was another reminder that many of the nation's largest life insurers face legal challenges and special examinations by regulators arising from misleading sales practices.
The country's largest life insurer, Prudential Insurance Company of America, based in Newark, N.J., has been accused in many lawsuits of practices similar to those discovered at John Hancock and is the subject of an investigation by insurance regulators in more than 20 states.
John Calagna, a spokesman for the New York insurance department, said special investigations into sales practices were under way at ``several'' other companies, which he declined to name.
In 1994, shortly after Metropolitan Life Insurance Co., based in New York, agreed to pay a $20 million fine after an investigation by regulators in two dozen states, the New York Insurance Department required companies offering insurance in the state to submit internal reports and advertising materials.
In the case of John Hancock, which is based in Boston, the department said it found that the company had failed to control the use of improper advertisements by its agents.
The department also said it found more than 200 violations arising from the practice of ``churning,'' in which customers were sold new policies paid for with proceeds of old policies, without proper disclosures about the risks of that practice or without the customers' signatures.
Replacing old policies with new policies often is not in consumers' best interests, but many companies have found the practice to be widespread, in part because agents have been able to earn commissions on the new policy sales.
The department also found that some Hancock agents were selling ``guaranteed'' retirement plans without explaining the nature of the guarantees or that the the plans really were life insurance policies with ``deposits'' made to the plan that were actually insurance premiums.
John Hancock issued a statement saying that ``the issues raised by New York are no longer problems.''
David D'Alessandro, a senior executive vice president at the company who supervises its sales to individuals and its 3,300 agents, noted that the company had dismissed more than 300 agents in recent years for violating company rules.
He and the Insurance Department both noted that the percentage of new policies paid for with proceeds of old policies had fallen sharply in recent years as the company tightened its oversight of agents.
Some of the findings in the department's report about its investigation were similar to accusations in a class-action lawsuit filed against John Hancock in federal court in Tampa, Fla., in September. Members of the class-action suit include some state court reporters in Florida who said they were sold retirement plans that had not adequately disclosed that the plan was, in fact, an insurance policy.
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