Allianz Life Insurance Co. of North America will pay $10 million to settle charges that it sold unsuitable annuities to thousands of senior citizens in California.
The Golden Valley-based insurer also agreed to strengthen the way it reviews annuity applications and to better explain its products to customers, under the settlement reached with the California Department of Insurance.
"We made a business decision with this settlement that will allow us to focus on our priorities of providing first-class products and service to our consumers instead of concentrating our efforts on litigation," Allianz Chief Executive Gary Bhojwani said. Allianz admitted no wrongdoing.
Allianz has been the subject of legal and regulatory scrutiny concerning the way it sells and markets annuities to older people.
Critics say the company uses misleading promises of "upfront" cash bonuses to persuade senior citizens to buy complex financial products that don't serve their best interests.
Allianz maintains that it never intentionally misled investors and that the terms of its annuities were clearly spelled out in sales documents.
In December 2006, the California Department of Insurance named more than 100 people, all senior citizens, who made "financially disadvantageous" deals in swapping existing annuities for Allianz products.
"Allianz has failed to adequately train its agents as to what constitutes a proper and improper replacement annuity," the California regulators said in a court proceeding.
