Results from an audit more than five years ago by New York regulators have landed Columbus-based supplemental life and health insurer Aflac in hot water.
The company, headquartered on Wynnton Road, is paying more than $1.1 million in the case that covers the years between 2009 and 2011, the New York Department of Financial Services said in a release dated July 2. The payment includes a civil penalty of $176,890 for various violations, the agency said.
The bulk of the outlay — $961,478 and change — covers payments to New York holders of Aflac policies and their beneficiaries. It is being paid under a consent order because the firm did not adequately give consumers "full and clear information" connected to the replacement of their existing life insurance in order to make the proper decision on their needs for other policies, the state agency said.
Specifically, the regulators said its audit over three years found that Aflac failed to disclose enough information to applicants shopping for new policies, while the company did not offer enough information in advertisements related to policies written with accelerated death benefits. The agency also said the firm simply did not train its agents well enough to understand New York's state regulations and requirements.
"Consumers should be able to trust that their insurers are providing them with information that helps them make the best decision," Maria Vullo, New York's Department of Financial Services superintendent, said in the release. "DFS's regulation protects the interest of the public by establishing minimum standards of conduct to be observed in the replacement or proposed replacement of life insurance policies. It is paramount that consumers are provided with clear and thorough information when transacting for life insurance policies."
Vullo noted her department will act to protect consumers from harm by licensed insurers in New York and make sure they receive restitution. At the same time it was admonishing Aflac, her office was levying a fine of more than $1.3 million against insurer Transamerica for various violations. In that case between the years 2006 and 2009, the state also is receiving more than $1 million from that firm to hold for beneficiaries or distribute the money to them.
Aflac responded to the Ledger-Enquirer's request Tuesday for comment on the New York settlement, releasing a statement through spokesman Jon Sullivan.
"Aflac will always cooperate with regulators to ensure our mutual goal of providing policyholders with quality products and services at affordable costs," the company said. "We appreciate the feedback from regulators regarding these matters that were reviewed in a routine market exam conducted in 2012. We made appropriate adjustments five years ago to ensure compliance with all rules and regulations."
Perhaps best known for its humorous and whimsical Aflac duck commercials and promotions, the company does business in all 50 states and Washington, D.C. However, more than 75 percent of its business is in Japan, with the health-conscious population there gobbling up insurance policies to protect themselves financially during times of illness or accidents.
In business more than six decades, Aflac has run into state regulators several times. Last December, it reached a collective $350,000 settlement with five states related to failing to notify the beneficiaries of policyholders who had died. The multi-state examination of Aflac included Florida, California, New Hampshire, North Dakota and Pennsylvania.
In 2012, the insurer was fined a combined $1.6 million by the states of Idaho, Minnesota and Missouri following a review of its business. The "market conduct" reviews, launched in 2009, covered a variety of areas, including underwriting, sales and marketing, sales agent licensing, handling of complaints and claims practices, according to a settlement order from the three states.
All of the fines, however, are miniscule when compared to the revenues that Aflac racks up each year. In 2017, it reported a profit of $4.4 billion on total revenues of $21.7 billion. The company's global workforce tops 10,000, with just over 4,000 of those staffers earning a paycheck at its two large campuses in Columbus.