September 25, 2002
FOR IMMEDIATE RELEASE
CONTACT: CHRISTOPHER GOETCHEUS
Division Of Insurance Fines AAA Life Insurance Over $500,000
( BOSTON, MA) The Massachusetts Division of Insurance today fined AAA Life Insurance Company of Washington D.C. in excess of $500,000 for marketing and selling term life insurance that does not comply with state laws. The term life product in question was direct marketed to more than 870,000 Massachusetts members of the American Automobile Association. Approximately 4,500 members purchased the term life coverage.
The Division's review of the product found that AAA Life misrepresented the need for a physical examination to determine eligibility for coverage and misinformed consumers about the amount of accelerated death benefit coverage in the policy. In addition to failing to meet disclosure requirements of state insurance privacy law, AAA Life was also found to have issued misleading solicitation materials by marketing the term life insurance as a group product, when it failed to show that members of the American Automobile Association qualify as a group under state laws specific to health and life insurance.
"Consumers need accurate information to make an informed decision about whether an insurance product is an appropriate one for their own financial planning. Before this product is marketed again, the insurer will need to take corrective action," said Commissioner Julie M. Bowler.
While there is no evidence to suggest that the 4,500 consumers who purchased the term life product have been directly harmed by the insurer's failure to comply with state laws, a cease and desist order has been issued preventing AAA Life from selling the product until the Division reviews and approves the product and marketing materials. All existing policies in Massachusetts are valid and AAA Life must honor all verifiable claims against those policies.
Policyholders with questions concerning AAA Life's policy form # LTL-97 may contact the Division of Insurance Consumer Service section at (617) 521-7777.