December 6, 1996
By: Tracy Sadeghian
Death. It's something we don't like to think about.
Many Missourians make plans to provide for loved ones they'll leave behind..by buying life insurance.
But some customers of the world's largest insurance company..the Prudential..have learned that their piece of the rock has crumbled.
That's because of some moves Prudential salespeople made with customers' policies.
At issue: deceptive sales practices used to sell Prudential customers bigger, more expensive polices. These policies were not always in the customer's best interest.
As K-B-I-A's Tracy Sadeghian reports, these sales tactics have landed the Prudential in hot water with some Missourians and state insurance regulators...
And it was inappropriate advice given by Prudential sales agents that has led to the nation's largest settlement against an insurance company.
Under the terms of an agreement hammered out with a multistate task force of insurance regulators, Prudential will hand over a record 35-million-dollars in fines to 44 states.
Missouri's cut is 600-thousand dollars.
Prudential has also agreed to a nationwide restitution program, that could top one-billion dollars.
The reason: deceptive sales practices known as "churning" and "twisting".
"Churning" occurs when a sales person makes repeated sales to the same customer in order to make commissions.
Twisting happens when bogus comparisons are made to net a sale.
70-year-old Sarah Tuso says she's been churned.
Sarah is a North Kansas City widow who lives on a meager monthly social security check.
She makes ends meet by telemarketing for the local blind association.
When Sarah's husband died a decade ago, he left her with an eleven-hundred-dollar paid-up life insurance policy.
Sarah also had her own paid-up two-thousand-dollar policy.
She planned to use both policies to pay for her funeral.
But Sarah says trouble began when two Prudential agents showed up one day at her doorstep...
Tuso claims the agents told her she could buy a bigger life insurance policy and pay for it with the dividends from her two paid-up policies...
But Sarah trusted the sales agents and bought the new policy.
She later saw the red flag when she read her annual statement from Prudential...
That loan had been taken out against Sarah's two paid-up policies to pay for the premiums on the new policy...
Meeks claims that sales agents selling new policies don't always have the client's best interest at heart...
Prudential Spokesman Robert DeFillippo disagrees...
But former sales agent Meeks says Prudential encouraged churning...