Prudential Suspends Sales of Its Life Policies by Wells Fargo
In a sign of widening fallout from Wells Fargo’s sales scandal, Prudential said Monday that it was suspending sales of its life insurance policies through Wells Fargo until it completed an investigation into the bank’s sales tactics.
But Prudential is not the only insurance company that may have been affected by allegedly fraudulent insurance policy sales at Wells Fargo. On Monday, Wells Fargo announced that it had temporarily cut off its sales of another insurance product it had offered at its bank branches: renters’ insurance from Assurant.
“We are suspending referrals for renters’ insurance until we can do a complete review of our online insurance product referrals,” said Mark Folk, a spokesman for Wells Fargo.
Assurant and Wells Fargo declined to comment on whether they had uncovered any problems with Wells Fargo’s renters’ insurance sales.
“As a matter of policy, we don’t comment on our clients,” said Linda Recupero, a spokeswoman for Assurant.
Last week, three former Prudential employees filed a whistle-blower lawsuitasserting that the company had tried to hush up evidence that Wells Fargo bankers — who were supposed to market a low-cost Prudential policy, MyTerm, to their customers — opened sham accounts in customers’ names and had premiums withdrawn from their accounts without their consent or knowledge. Many of the victims did not speak English, the suit said.
The employees had been fired by Prudential — in retaliation, they say, for trying to prod their bosses to act more aggressively on the findings. Prudential disputes this account; Scot Hoffman, a Prudential spokesman, said the employees were fired “for appropriate and legitimate reasons that were entirely unrelated to Prudential’s business with Wells Fargo.”
ANATOMY OF A SCANDAL
For years, Wells Fargo employees secretly set up fake accounts without customers’ consent.
$185 Million Fine
Regulators said the illegal practices, first reported in 2013, reflected serious flaws. The bank fired 5,300 mostly low-level employees.Sales Goals, Broken Rules
“They warned us about this type of behavior,” said an ex-worker, “but the reality was that people had to meet their goals.”Ex-Workers File Suits
“These are the people who have been left holding the bag,” said a lawyer for the workers.Alarms Raised in 2005
“Everybody knew there was fraud going on, and the people trying to flag it were the ones who got in trouble,” said a manager who was fired.‘Lions Hunting Zebras’
The bank targeted immigrants who spoke little English and older adults with memory problems, ex-workers said.Scrutiny for U5 Files
“It’s like being blackballed,” said a lawyer who specializes in Finra arbitration. “It can be a showstopper for a career.”Smothering Customer Lawsuits
The bank is killing lawsuits by moving them into private arbitration. “It is ridiculous,” said a woman suing over sham accounts.
At least one other bank, BB&T, continues to sell Prudential’s MyTerm insurance, but the majority of the product’s sales came through Wells Fargo, Mr. Hoffman said.
He said the timing of Prudential’s decision to suspend sales through Wells Fargo — which came just days after Prudential’s former employees went public with their claims — was coincidental.
“We have been conducting our review for some time,” Mr. Hoffman said. “It became apparent last week in discussions with Wells Fargo that it was going to take more time. We thought that suspending sales of the MyTerm product through the Wells Fargo franchise was the best course of action until we have all the facts about whether it is being distributed properly and in the best interest of customers.”
Prudential would appear to be the first partner company of Wells Fargo to get caught in the aftermath of the bank’s admission three months ago that thousands of its employees had opened unauthorized accounts in bank customers’ names. The bank has fired more than 5,000 employees and paid fines of $185 million in connection with the scandal.
Wells Fargo employees were encouraged to aggressively sell a mix of products to their customers, former Wells Fargo employees said, including insurance offerings from partners. The renters’ insurance Wells Fargo sold for Assurant had some similarities to Prudential’s MyTerm policies: Both were fairly inexpensive products that could be bought in a few minutes, after the applicant filled out a brief online questionnaire.
“As we have consistently reinforced, if we identify any instances where a customer received a product they didn’t ask for, we will make it right,” Mr. Folk said. The bank eliminated its sales goals for retail bankers in October, he noted. It no longer offers incentives for selling customers additional products, including insurance policies.
Also on Monday, Alex Perea, a Wells Fargo customer who said he had been victimized by the insurance scheme, filed a lawsuit against Prudential. He and his lawyers are seeking class-action status for the case.
Mr. Perea, of Arizona, received a collections notice in October about unpaid premiums on a MyTerm policy, according to his complaint. A Wells Fargo customer since 2010, Mr. Perea “never authorized anyone to seek life insurance on his behalf” and was unaware that a Prudential policy had been taken out in his name, he said in the lawsuit.
When he called Prudential’s customer service center, the insurance company refused to cancel the policy, the complaint said. Mr. Perea later discovered that some premiums for the policy had been deducted from his Wells Fargo savings account.
Through his lawyer, Neil Mullin, Mr. Perea declined to comment further on his complaint. The case was filed in Federal District Court in New Jersey, the state where Prudential is headquartered.
“Prudential believes the lawsuit is totally without merit and will vigorously defend itself in the appropriate legal venue,” said Mr. Hoffman, the company spokesman. “If any Wells Fargo MyTerm customers have concerns about the way in which the product was purchased, Prudential will reimburse the full amount of the premiums they paid and cancel the policy.”
Wells Fargo’s sales scandal rocked the bank, forcing the retirement of its chief executive and causing some of its customers to flee. The bank is under investigation by the Justice Department, the Securities and Exchange Commission, multiple state attorneys general and prosecutors’ offices, and several congressional committees.
The aftershocks keep coming: On Friday, an industry overseer, the Financial Industry Regulatory Authority, said it was investigating claims from former Wells Fargo employees that the bank left black marks on their employment records in retaliation for their attempts to draw internal attention to the bank’s fraudulent activities.
Finra wants to “review the facts and circumstances surrounding these allegations,” it said in a statement, and it has set up a hotline for former Wells Fargo employees — many of them financial advisers — who are registered with Finra and wish to dispute their termination records.
P.C: http://www.nytimes.com/2016/12/12/business/dealbook/wells-fargo-prudential-insure-policies.html
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