The insurers are offering various forms of restitution to the consumers who were bilked. But some say they’re still getting a raw deal–especially the policyholders at Prudential Life.
Recently, a group of Prudential employees and ex-employees in Plymouth, Minn., stepped forward to say that the angry policyholders may be right. In affidavits filed in the New Jersey federal district court (which is overseeing restitution), they allege that Prudential twisted the process to limit what consumers get.
A number of these whistle-blowers are filing lawsuits in Minnesota, charging that Pru retaliated against them for speaking out at work, says their Minneapolis attorney Fred Neff. Pru rejects any blame. “We have reviewed the allegations and found no evidence to substantiate the charges,” spokesperson Robert DeFillippo says.
The mis-selling, at Pru and other insurers, revolved around three appealing lies. Remember them, because they’re still around.
Some 640,000 Pru policyholders said they were victims of these lies. Pru reviewed their written claims and gave each one a score, from 0 (meaning Pru disagrees) to 3 (for people with clear proof). Policyholders with 3s were entitled to full restitution–their money back or their policy restored. Claimants with 1s and 2s were offered partial restitution. Those who objected to their score could appeal their case. Pru supplied a lawyer free.
The restitution plan also called for Pru to trace the amount of money each claimant paid in premiums, how the money flowed from one policy to another and whether loans were taken out. That determined how much a bilked customer should get back.
Here’s where the whistle-blowers come in. They charge, among other things, that Pru employees were pressured to lower people’s scores and told to leave out certain policies when evaluating claims. Claims were also downgraded if consumers hadn’t used certain “magic words” on their forms, Pru supervisor Mark Cardenas told the court. For example, say the agent used cash from one of your old policies to buy a new one. You had the best case if you wrote that you were, in industry jargon, “churned.” If you used other words, your claim might get a lower score. One arbitrator, who wants to be anonymous, says she observed that, too.
Again, Pru’s DeFillippo objects. “Safeguards made it virtually impossible for the process to produce anything but fair and equitable reviews,” he says.
Other side: I’ve heard from consumers who say they saw these practices from the other side. Carmella Catrino, 59, of Edison, N.J., has tried for three years to get a key policy included in her claim–the one on which she lost the most. Joan Parks, 55, of Auburn, N.Y., got a written offer containing worse terms than she had agreed to verbally. Tracy Cox, 35, of Hagerstown, Md., discovered forged policies in her name, but had to subpoena Pru for the records.
I can’t judge these complaints, and Pru won’t comment on them. Laurence Gerowitz, an attorney for the policyholders, says he sees many scores that don’t reflect the evidence in the files. A former policyholder attorney, Howard Kronberg, has seen claims scored 3 where people weren’t offered as much restitution as they were due. Insurance specialist Richard Sabo, of Money Concepts in Gibsonia, Pa., found proof in some files of agent wrongdoing, which Pru’s scorers had overlooked. Still, Gerowitz thinks the appeals are fair. About 75 percent of his cases have gotten a higher score, he says.
For many Pru policyholders, the system worked. They got the payback or coverage they deserved. The question is, how many didn’t–and was that deliberate or a simple oversight? Both Pru and Milberg Weiss, the law firm that won the class-action settlement, got court permission to investigate.
Pru has already declared itself clean, before even hearing testimony. Paul DeAngelo, assistant commissioner of New Jersey’s insurance department (Pru’s home state), says he expects to find that the safeguards are sufficient. They sound like officials of EgyptAir: starting with the result they want the hearing to reach.
That leaves top attorney Mel Weiss to investigate the system he himself put in place. He thinks this flap might be “sour grapes” from employees whose jobs are winding down. “But we won’t tolerate wrongdoing,” Weiss says. The firm he chose to monitor Pru did find problems during the process and made repairs. (And, of course, if it weren’t for the lawsuit, consumers would get zip.)
Weiss also created the next big restitution program coming up: that of MetLife. But to duck the high cost of appeals that Prudential bore, MetLife will generally allow no appeals at all. Policyholders will have to take whatever they get. Weiss thinks the offers will be fair, because they’ll be handled by an independent group.
Mass justice, however dispensed, requires good faith. Whether Pru passed the test and MetLife succeeds remain to be seen. Life insurance is so important. Why does the industry make us doubt?
