Pennsylvania Insurance Commissioner Diane Koken has reached a settlement that requires the brokerage firm Waddell & Reed to pay $11 million in restitution to consumers nationwide whose variable annuities were switched from one product to another. The Pennsylvania Insurance Department estimates that 150 consumers were affected.
“Some Waddell & Reed producers violated consumers’ trust by deliberately campaigning to switch customers from one variable annuity to another,” Koken said. “These recommendations were made without regard to the customers’ best interests and ultimately cost consumers money in surrender fees.”
Pennsylvania has joined in a joint, multi-state settlement involving Waddell & Reed Inc. and W & R Insurance Agency Inc. as a result of their replacement of certain variable annuity products. The settlement was coordinated through the National Association of Insurance Commissioners, together with the National Association of Securities Dealers, and involves several state insurance and securities regulators.
Under the terms of the settlement, Waddell has agreed to pay $11 million in restitution to affected consumers. The polan is to be implemented over a six-month period through an independent consultant, and $2 million in civil penalties are to be apportioned among the participating states. According to the terms of the settlement, Waddell has paid a $44,383.90 civil penalty to the Commonwealth based on the number of Pennsylvania residents affected.
“Insurance companies and producers doing business in Pennsylvania need to remember that the replacement of insurance and annuity products must always be in a consumer’s best interest,” Koken said. “Abuses will be rooted out and action will be taken against the abusers.”
A copy of the settlement is available on the department’s website at http://www.insurance.state.pa.us.
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