LANSING--Michigan Insurance Commissioner D. Joseph Olson today announced that Michigan will join more than 25 other states in signing an agreement to take action against Prudential Insurance Company of America for widespread abuses in its sale of life insurance. The company, fined $35 million, the largest penalty ever assessed against an insurer, will be required to make restitution to policyholders to correct any harm done by its improper life insurance sales practices. Under the agreement, Michigan's share of the fine will be $798,000.

"Signing this agreement demonstrates Michigan's commitment to protect its citizens from insurance abuse," Olson said. "It sends a strong message that improper sales practices in the marketing of insurance will not be tolerated. When a company does not act responsibly, it will be held accountable for any wrongdoing to its policyholders."

A recently-released 232 page report by a multi-state task force of insurance regulators formed the basis for the action. The report details deficiencies found across the country with regard to the company's sales and marketing practices, internal controls to prevent unwarranted replacement of existing life insurance policies with new ones, systems to recapture commissions from agents, and agent training and discipline.

The multi-state task force that conducted the extensive review of the company has designed a broad remediation program to correct any harm done to policyholders. This outreach program is for all policyholders who purchased Prudential life insurance contracts other than term insurance between January 1, 1982 and December 31, 1995. These customers will be contacted in the next 60 to 90 days and given the opportunity to submit sales-related claims for review and possible restititution.

The reviews will be conducted by an independent firm and will use a scoring system to determine if a consumer has been harmed by the company's past sales practices and what the form of relief or compensation will be. Types of relief offered will be determined by the facts of each individual claim, and consumers will be offered the opportunity to appeal findings at a number of points in the process.

For those customers who are found to have been the objects of improper sales practices, the range of compensation includes full refunds of premiums, continued coverage with no additional premiums due, or partial refund of premiums.

Built into the claims review system is an appeal process where claims are independently re-evaluated and provisions for a policyholder representative who will advocate on behalf of the consumer. The cost of the entire remediation program will be borne by Prudential and will be under the direction and oversight of a panel of state insurance regulators and subject to an independent audit.

"I am pleased with the cooperative effort of the many states on behalf of the nation's consumers," Olson concluded. "With this approach we were able to obtain comprehensive restitution for all policyholders who may have been the victims of misrepresentation."

Michigan residents who believe they may be affected or want more information should call (800) 736-8913.