State Farms and the Life Insurance Landscape
Though it may not be immediately apparent to consumers, the insurance and annuity markets are in constant flux. Sometimes, the changes may take place at a somewhat glacial pace. 2016, though, has been a year with a number of major shifts and upsets in the insurance marketplace. New regulations on fiduciary responsibility, declining sales and profits, a number of large class-actions and fines: the marketplace has shifted, and large insurance companies are scrambling to try and find new ways to make a profit and avoid regulatory action. One such company is State Farm, a company that is mostly known for auto and home insurance. However, their brokers also make a tidy profit selling securities, variable annuities, universal life insurance, and other investment products. Or rather, they did: State Farm has directed their brokers to stop selling many of these products, in order to avoid having them act as fiduciaries to their clients.
This is due to a Department of Labor regulation that requires brokers who sell certain products and earn a commission to take on fiduciary responsibilities. In essence, it requires that the brokers act in the best financial interest of their client, or open themselves up to liability. It may surprise policyholders to discover that their ‘investment advisors’ weren’t already required to do that, but many brokers and insurance companies have complained that the rules are onerous and may hurt sales. While our California insurance attorneys would say that any sale which can’t pass the test of being in the policyholder’s best interest is probably a sale that shouldn’t happen, companies like State Farm are acting to avoid the liabilities that come with the new rules, in this case by making them a moot point.
Not all insurance companies are in a position to do this. While State Farm is still free to sell many of its other profitable insurance policies, like auto, home, and universal life insurance, many companies can’t shut down a sideline in this way. State Farm will continue to sell and administer these policies through a hotline, but this is likely to result in much lower sales. Some companies that are more focused on the affected financial products are having to find other ways to skirt or adhere to the regulations. Some companies are rolling out new payment options, having clients pay brokers for advice and purchase policies separately, without a commission. Whatever tactic they use, the rush to avoid fiduciary responsibility may indicate that companies aren’t certain their policies and brokers can pass muster.
Some of the major annuity and life insurance providers are:
- Aviva/Athene/Accordia Life Insurance Company
- Transamerica Life Insurance Company
- John Hancock Life Insurance Company
- Bankers Life Insurance and Casualty company
- Massachusetts Mutual Life Insurance Company
- Midland Life Insurance Company
- North American Company for Life and Health Insurance
- Pacific Life Insurance Company
- Prudential Life Insurance Company
- Genworth Life Insurance Company
- ING USA Annuity and Life Insurance Company
- Lincoln Benefit Life Company
- Metlife/Metropolitan Life Insurance Company
- Unum Life Insurance Company of America
- Voya/Reliastar Life Insurance Company
If you or a loved one has purchased a State Farm or other universal life insurance policy, contact the California insurance attorneys at Evans Law Firm. Our office has experience handling cases involving complex financial products and large insurance companies, and can help guide your case through a civil trial or toward an equitable settlement. Our office handles financial and physical elder abuse, IRS, SEC, and qui tam whistleblowers, and annuity and insurance cases. We can be reached at (415) 441-8669, or by email at firstname.lastname@example.org.