[T]he Department of Financial Regulation has reached a $300,000 settlement with Lafayette Life Insurance Company after the company failed to obtain key financial and background information from customers to make sure its products were appropriate.
DFR Commissioner Michael Pieciak said of the company’s 163 annuity transactions in the state over a five-year period, 162 customers opted out of self-reporting the information. He said this information includes questions like how many assets customers have, how liquid their assets are, or how soon they would need the money from a claim.
Pieciak said his department didn’t actually find any customers in Vermont who were sold inappropriate policies, but that the company’s practices created that risk. He gave an example of someone approaching retirement age being sold a policy that they couldn’t access for five or 10 years to demonstrate how not having this information could cause problems.
In addition to paying the penalty, Lafayette will also make improvements to its supervisory procedures, including annual training and enhanced reporting.
“The department’s top priority is ensuring Vermonters get a fair shake from the financial services firms that do business in our state and it concerns us greatly when a firm’s supervisory controls designed to protect consumers fail,” Pieciak said in a statement.
“In this instance, I am pleased that Lafayette cooperatively worked with our department and took this matter seriously by hiring new personnel, changing its procedures, and implementing a training program to prevent this from happening again,” he added.
In 2016, Alan Dauphin, a Lafayette agent based in Newport, was charged with a $10,000 penalty and other remedial action for his role in this violation. Pieciak said Dauphin handled a “very, very high percentage” of the 163 Vermont cases, although there were a few instances involving other agents.
In addition to failing to obtain the proper background information from customers, Dauphin was also selling policies that he didn’t have the proper license to sell.
“Our department takes our mission of protecting Vermont consumers seriously,” Pieciak said. “Even though we don’t know anybody that was harmed, it’s still concerning that those regulations weren’t followed — that’s why you see the penalty, and why you see the action the company is taking.”
Lafayette did not respond to a request for comment Monday.
