Pru Halts Sales of Term Policies Through Wells Fargo

[walthamny]

Here is the link.

Prudential halts some insurance sales through Wells Fargo after ex-employees' whistleblower lawsuit


Shouldn't the Insurance dept of CA caught this. High lapse rate small life policies with non med requirements, most of them happened to be hispanic clients. I would be pissed if someone applied for a small life policy under my name just because I had a checking with them. I wonder how many fake life policies exist. And this is the issue with trying to cram selling life insurance through bank branches.

 

[DHK]

This was the version of the article I read:

http://www.bizjournals.com/philadel...-fargo-fake-account-prudential-insurance.html

Looks like, according to this article, that "The policies were sold predominantly to people with Hispanic names in Southern California, South Florida and southern regions of Texas and Arizona, according to the plaintiffs."

Looks like the CA DOI is starting an investigation now:

California opens probe into Wells/Prudential news - Reuters - Prudential Financial, Inc. (NYSE:PRU) | Seeking Alpha

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Ironically the same day as this:

Commissioner Jones receives national consumer advocacy award

 

[VolAgent]

Non-med policies that were super easy to get lapsed quickly... Oh, and they were bought primarily by people who formed a large ethnic community in that area...

Nothing very surprising there. Depending on what Pru was reporting to the DOI, they probably didn't have a clue this was going on. Also, I seriously doubt the DOI would have gotten the applications as well to see the real clues. Remember, Met crashed and burned on their program with Walmart. This seems very similar in nature. I'm sure these fake ones lapsed even faster than the other policies, but again if Pru wasn't reporting it or breaking it out, no way for the DOI to know.

Remember, audits are only every few years and often by just one DOI on behalf of everyone. The DOI is very reactionary in nature, if no one is reporting it, then it isn't happening.

 

[mplsmm]

I just can't believe no one at Pru caught a 70% lapse rate. Those big carriers break it down by channel, demographic and a million ways. I can't believe there wasn't one single guy that said, 70% lapse? To Hispanics? That all use Wells Fargo Drive as an address? Could there be something more to this? You don't need Erin Brokovich for this mystery.

 

[VolAgent]

I am interested to see the reprocussions for Prudential on all this.

Do you think Prudential agreed to binding arbitration with Wells Fargo?

 

[mplsmm]

If you read the original story on the Wells fiasco, they were not letting customers sue for setting up the fraudulent accounts because of the arbitration clause. Right, the arbitration clause they didn't agree to on an account they didn't know about. Since the great 'incident' of 2010, I hate Wells. I did have to open an account there a few weeks ago for Girl Scouts, it was an overblown fiasco. It took 3 hours, I was only marginally less pissed because I let my kids trash the joint after the 2nd hour. Then a guy called me the following Monday to make sure I had agreed to the account and THEN they sent a letter and called asking me to come in to fill out another verification form or they would close the account. If I wasn't required by the Girl Scouts to use them, I would have closed the account, who has time for all of that? So now their sales will drop and it will happen all over again in a few years.

 

[walthamny]

Volagent, I agree with only half of what you posted. DOI's are reactionary coast to coast. However, in this case, Pru is a publicly traded company. They are publicly traded company on the NY stock exchange. They financials and management controls are audited by a large CPA firm. CPA firm controls are also tested for reasonableness by the DOI.

With all respect, I have no problem with how the policies got issued. If you have a high acceptance rate or a high lapse rate among any sub group, you have to have to have controls to investigate. If a life insurance company can't manage risk in underwriting, it shows bad judgement in how it can manage risk in a worse case scenario.

I actually don't have an issue they did not catch that most of them because the names were hispanic. As a publicly traded company, Pru may not want to build controls that are too ethnic.

 

[mplsmm]

I kind of disagree, ethnic and the elderly are taken advantage of at a far higher rate and just like if PRU had 70% of the policies lapse of people that were 80+ centered in one geographic area using the same place to sign up, my alarm bells would go off and it would take an underwriter about 5 minutes to run a report of lapsed policies and if they found that every one had used the same address, a wells fargo corporate address, it should have gone higher. But there are claims there were 3 whistleblowers that were fired for non related issues. So it's back on Pru.

 

[VolAgent]

Volagent, I agree with only half of what you posted. DOI's are reactionary coast to coast. However, in this case, Pru is a publicly traded company. They are publicly traded company on the NY stock exchange. They financials and management controls are audited by a large CPA firm. CPA firm controls are also tested for reasonableness by the DOI.

With all respect, I have no problem with how the policies got issued. If you have a high acceptance rate or a high lapse rate among any sub group, you have to have to have controls to investigate. If a life insurance company can't manage risk in underwriting, it shows bad judgement in how it can manage risk in a worse case scenario.

I actually don't have an issue they did not catch that most of them because the names were hispanic. As a publicly traded company, Pru may not want to build controls that are too ethnic.

Just so we are on the same page.

I am not defending Prudential for not catching it. And really I am not even defending the DOI for not catching it. I'm just saying we shouldn't be surprised the DOI didn't catch it. The DOI should be more proactive, however they aren't and I was simply pointing that out.

The blame lies with Prudential and Wells Fargo. By all accounts, it was caught or brought to middle managements attention years ago. They simply choose to ignore it.

As this article points out, as it stands the accounting firms didn't mess up either. They are so focused on fraud as it affects the stock price, they simply weren't looking and wouldn't have cared had they found it. Also, so much of what they do is modeling and statistics, much of which they get from their client, it is impossible to find without real auditing.

Wells Fargo: Where Was the Auditor? - WSJ

This scandal is pointing out structural flaws in the system, not so much that everyone besides Wells Fargo was a bad actor.

 

[yorkriver1]

Which combination of naive--gee, we never thought anyone would take advantage like this, it's against the law-- or cynical--we can't be blamed for what we can't see--was in play.