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Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company, ...

Market Conduct
Friday, June 30, 2006
Docket No. 06-044-I

DOCKET NO. 06-044-I

In re: Metropolitan Life Insurance Co., Metropolitan Insurance And Annuity Company, Metropolitan Tower Life Insurance Company, & Security First Life Insurance Company

ORDER ADOPTING REPORT OF EXAMINATION

NOW COMES John P. Crowley, Commissioner of the Vermont Department of Banking, Insurance, Securities and Health Care Administration, and hereby issues the following Order adopting the Market Conduct Examination Report in the above referenced docket number, subject to the exceptions and qualifications discussed below.

FINDINGS OF FACT

1. Pursuant to the authority granted by Vermont law, including, but not limited to, that contained in 8 V.S.A. §§ 10-13, 18,3564-3574 and 4726, the Commissioner of the Department of Banking, Insurance, Securities and Health Care Administration ("the Department") is charged with administering and enforcing the insurance laws and regulations of the State of Vermont and is authorized to conduct periodic examinations of insurers and licensees to determine whether they are in compliance with said laws and regulations.

2. Metropolitan Life Insurance Company is a publicly traded stock company organized under the laws of the State of New York. Metropolitan Insurance and Annuity Company merged into Metropolitan Tower Life Insurance Company in 2004. Metropolitan Tower Life Insurance Company is a wholly owned subsidiary of Metropolitan Life Insurance Company. Security First Life Insurance Company is a wholly owned subsidiary of Security First Group, Inc., which was acquired by Metropolitan Life Insurance Company in 1997. Unless stated otherwise, this Order shall refer to all four entities collectively as "the Company."

3. On May 30, 2003 a final market conduct examination report was issued by examiners James Montgomery and Robbie Kriplean entitled REPORT OF EXAMINATION OF MARKET CONOUCT AFFAIRS OF METROPOLITAN LIFE INSURANCE COMPANY, METROPOLITAN INSURANCE AND ANNUITY COMPANY, METROPOLITAN TOWER LIFE INSURANCE COMPANY, SECURITY FIRST LIFE INSURANCE COMPANY BY VERMONT DEPARTMENT Of BANKING, INSURANCE, SECURITIES AND HEALTH CARE ADMINISTRATION (hereinafter "the Report").

4. In accordance with the requirements of 8 V.S.A. § 3574(b), the Report was transmitted to the Company and the Company was afforded a reasonable period of time to submit a formal written response to the findings of the Report. The Company submitted a formal response ("the Response"), discussed issues raised in the Report with the Department and provided additional information requested by the Department.

5. Pursuant to 8 V.S.A. § 3574(c), the undersigned Commissioner has fully considered the Report, the Company's Response, and additional information provided.

CONCLUSIONS OF LAW

6. The Company has suggested numerous changes to the Report. To the extent this Order does not expressly adopt changes suggested by the Company, those suggested modifications are not adopted. Unless specified otherwise, the Department adopts the Report as it has been written.

7. In the "MULTIDlSTRJCT LITIGATION" section of the Report (page 7), the examiners discuss the resolution of several class action lawsuits which were pending during the course of the examination period.

The Company objects that the Department was fully apprised of the terms of the settlement and that the examiners note all claims involving Vermont claimants have been resolved. As such, the Company believes the litigation to be "a matter previously reviewed and closed by the Department" (Response at page I) and asks this matter not be included in the Report. Vermont law does not require exclusion of issues that may have been the subject of previous review by the Department from examination reports. 8 V.S.A. § 3574(a). As such, the Department adopts this portion of the Report.

8. In the section of the report entitled "FINES, PENALTIES & FORFEITURES" (page 9), the examiners indicate the Company has not filed Bulletin 30 reports for 1998, 1999 and 2000. As such, the examiners recommend the Company establish procedures for filing the required reports. The examiners further outline various civil penalties paid by the Company to the United States Government and the State of Florida for sales and marketing practices.

The Company does not dispute that it has failed to file Bulletin 30 but notes that the action by the United States outlined in the report was not subject to such reporting because it did not involve a state insurance department. The Company correctly argues that Bulletin 30 only requires the reporting of actions involving state insurance departments. Nevertheless, the action involving the Florida Department of Insurance required a Bulletin 30 report.


The Company objects to the examiners' discussion of the litigation for similar reasons noted above. Specifically, the Company notes that the Company entered into a stipulation in 1994with the Department that involved similar issues. The Company notes the facts at issue in the subject litigation occurred prior to the subject examination period.

Upon consideration, the Department adopts the examiners' recommendation that the Company implement procedures to comply with Bulletin 30, but finds that no fine is warranted. The Company shall submit a signed written description of those procedures no later than 30 days after the appeal deadline of this Order, for the Department's approval. Further, as noted above, it is not improper for the examiners to discuss litigation that was pending or resolved during the examination period and this portion of the Report is adopted.

9. In the "SALES AND MARKETING - 'Target' Premium Issue" section (Report page 10 - 11), the examiners note that the Company understated its target premiums for universal life products for fifteen years (from 1983 to 1998). The examiners opine that the target premium is the "key competitive device used in the sale of universal life policies." (Report at page 10.) The examiners note that understating the target premium may have induced people to purchase the subject policies based on misleading information and that such misstatement was a violation of 8 V.S.A. §4724 (2). The examiners recommend that the Company develop a compensation program with the Department.

In response, the Company disputes the definition of "target premium" and asserts "the 'target' premium is the minimum premium the company will permit to be shown on the specifications page for issuance of the policy. The amount is not intended as a device for comparison with other companies' products and is not, as alleged, the only figure available to compare similar policies." (Response at page 3, emphasis in original.) The Company explains that the policy is sold with an illustration1 which shows that policy values based on both guaranteed interest rates and charges and current interest rates and charges. The Company asserts that the values contained in the illustration are used by the

Company and by clients to compare products, not the target premium.2 The Company concedes that minimum premium to carry coverage to maturity is important for comparison, but other factors are equally as important. The Company further notes that actions taken in other states where the Company made restitution based on target premiums involved different policy forms that contained representations which are not included on the Vermont forms. As such, the Company requests the Department not adopt this portion of the Report.

Upon consideration, the Department will not adopt this portion of the Report, nor the examiners' recommendation. The evidence provided in the Report, coupled with the information in the Company's Response, constitutes insufficient evidence to establish a violation of 8 V.S.A. § 4724(2). However, the Department does not condone the miscalculation of the planned premium, for which the Company had to take corrective action, and this Order should not be read as an acceptance of that activity.

10. In the "SU ITABILITY - Questionable Suitability Cases" (pages 12 - 13) and "SUITABILITY -Written Standard s of Suitability"(pages 13 -14) sections of the Report (pages 12- 19), the examiners discuss three complaints received by the Department involving sales of variable annuities to people in their eighties. Two of the three complaints resulted in sales being reversed. The examiners also note that the sales in question did not appear to comply with the Company's written suitability guidelines contained in "Manager's Guide to Appropriateness of Sale" (the "Guide"). The examiners recommend (page 19) that the Company change the application to include a question as to whether a penalty will be incurred on the part of the annuitant and, if so, the approximate amount of that penalty.

In its Response, the Company notes that the product sold in all three cases (the Preference Plus Account or "PPA"), has certain features that make it appropriate for older clients. The Company notes the PPA product has a death benefit that is guaranteed to equal the principal, even if the market value of the account has reduced the account balance below the principal contributions. The Company also notes the PPA allows the systematic withdrawal of up to 10% of the account balance without a withdrawal charge. As such, the Company asserts all three were suitable sales. The Company also notes that the PPA application is no longer in use, and the current product's3 application includes a replacement and transfer disclosure form that requires the producer to identify charges and fees in justifying the suitability of the sale, on which the manager must also sign.

However, the Company does not discuss the suitability of the PPA to any of the three individuals discussed in the Report, other than to state that each invested in a Fixed Interest Account. (Response at page 7). While the PPA might not be per se unsuitable for elderly customers, based on the features discussed by the Company, the Company falls short of articulating the suitability of the policy for these individuals. When the Company receives complaints about sales, as occurred with these three accounts, the suitability of the sale should be investigated by a supervisor other than the manager responsible for approving the transaction, also using the Company's Guide to assess the suitability. In this way, complainants will be assured that the Company has applied its standards to their purchase.

Upon consideration, the Department adopts the examiners recommendation at the bottom of page 19 of the Report (See Recommendation No. 4, on page 30 of the Report). The application for the new annuity product ("PPS") includes sections for annuity to annuity, life insurance to annuity, and mutual fund to annuity transactions. The Company shall amend its PPS application to include another, catch-all section for other sources of funding for the annuity (such as certificates of deposit, stocks or bonds), to ensure that the sales representative and the manager account for any other costs associated with the transaction in anal yzing suitability.

Based on the Company's representations concerning the nature of the PPA product, it appears that sales of this product could be suitable for an elderly client in certain circumstances. From the information contained in the Report, it is impossible to tell if the subject sales were suitable, although two of the three sales were reversed. These sales were handled by the 'Department through the formal complaint process and fully resolved. The Department declines to impose a penalty for these sales.

Nevertheless, the Company must develop a formal plan for supervising the suitability of each sale for the individual client, which plan should include a provision for the supervisor to sign off on the suitability of the sale. This compliance plan should include also a provision for investigating complaints, requiring a different supervisor than the one who approves the sale to check the suitability of the sale under the Company's standards. The Company shall provide the Department with a written compliance plan, within 30 days of the expiration of the appeal deadline of this Order, for the Department's approval.

11. In the "SUITABLLITY OF ANNUITY PURCUASES" section of the Report (pages 14- 19), the examiners compare annuity account asset allocation to customer's stated investment objectives. The examiners conclude the Company exposes certain customers to more risk than was appropriate in light of the stated investment objectives. The examiners also note that many files do not contain the suitability worksheet or asset allocation questionnaire. The examiners note two files violated Vermont's former replacement regulation (Regulation 88-2)4 and that the Company failed to respond timely to an examiner inquiry in violation of 8 V.S.A. § 3565(b).

The examiners recommend (Report at page 19, numbers one and two, see also Recommendation Nos. 3A and B on page 30 of the Report) that the Company use "more objective means for assisting applicants with the choice of an investment objective" such as the numerical weighting methodology which the examiners employed to analyze the files. The examiners further recommend that the Company revise its procedures for matching the investment risk category of investment allocations with the risk category of the investment objective selected by the applicant.

In response, the Company criticizes the examiners' methodology for comparing investment objectives with actual investment risk assumed . The Company notes that no such objective test is presently endorsed by the SEC, NASD nor NAIC, nor by Vermont law and thus, the objective test concept proposed by the examiners is inappropriate.

The Company does not address the issue of the two violations of Regulation 88-2, Vermont's former replacement regulation, nor does the Company address the violations of8 V.S.A. § 3565(b).

Upon consideration, the Department agrees with the Company that a numerical methodology, such as employed by the examiners, is not a practical solution to ensuring investment choices are clearly analogous to stated investment goals. Further, the charts included in the exam, which purport to describe the most worrisome examples discovered by the examiners circumstances , do not appear particularly egregious. Because a client is allowed to choose only one investment objective, but in fact may be between two investment objectives, slight deviations from the investment objective numeric weight are to be expected. Although a serious deviation would be a problem, the examples in the Report do not appear sufficiently out of range as to constitute violations. The Department rejects this portion of the Report.

However, the two replacement regulation violations and the violation of8 V.S.A. § 3565(b) warrant the imposition of a $2,000 penalty.

12. In the "UNDERWRITING" section of the Report (page 20), the examiners note two violations discovered from a sample of 55 life policies. The examiners recommend that the Company revise its procedures to ensure compliance with 8 V.S.A. § 4724(20) and Vermont Regulation 22-2 § 5.

The Company does not respond to this portion of the Report.

Upon consideration, the Department adopts this portion of the Report, but does not adopt the examiners' recommendations, as the violations do not appear to be systemic or indicative of a lack of procedures. Under these circumstances, the two violations discovered by the examiners do not warrant the imposition of a fine.

13. In the "POLICY FORM FILINGS" section of the Report (page 21), the examiners note that of 50 long term care policies reviewed by the examiners, one file contained an application which did not appear to have been filed and approved by the Department. The examiners recommend the Company revise its procedures to insure policy forms are filed and approved prior to use.

In response, the Company notes that it cannot identify the form in question from the examination and requests the Department provide a copy of the form.

Upon consideration, the Department concludes that one document in fifty files which might not have been approved by the Department is insufficient to justify requiring the Company to revise its procedures, nor do these circumstances warrant the imposition of a fine. The Department adopts this portion of the Report, but does not adopt the examiners' recommendation.

14. In the "CLAIMS PROCEDUR£S AND PROCESSING" section of the Report (pages 22 -23), the examiners note the company failed to calculate interest on policy proceeds in accordance with 8 V.S.A. § 3665. Further, the examiners note the Company pays interest on policy proceeds under group policies based on the law in the state of the beneficiary at the time of death. The examiners recommend the Company recalculate interest on the impacted policies and send additional payments to comply with 8 V.S.A. § 3665. The examiners further recommend (page 23) the Company pay interest according to 8 V.S.A. § 3665 when certificate holders reside in Vermont, not beneficiaries.

In its Response (page 10), the Company notes that it did recalculate interest to come into compliance with 8 V.S.A. § 3665, on "certain" claims, "[a]s noted in the Report[.]" However, the Report only references (at page 22) the Company's agreement to recalculate the underpaid claims from the New England Mutual Life Insurance Company clain1s, and is silent as to the Company's treatment of the individual claim #2779737 or the group life claims.

Upon consideration, the Department adopts this portion of the Report and the examiners' recommendations. As noted above, the Response does not address the Company's procedures to ensure that benefits are calculated based on the law of the state of residence of the policyholder (not the beneficiary) at the time the policy was issued. The Company shall certify in writing, within 30 days of the expiration of the appeal deadline of this Order, that it has revised its procedures to provide for payment as outlined above. Additionally, the Company shall provide the Department with a written audit of the interest payments on policy proceeds for the past 10 years,5 within 90 days of the date of this Order. For each claim, the Company shall report the date of death, the date the proof of loss was received, the amount of insurance at the time of death, the runow1t paid to beneficiaries, the date payment was made, the an1ount that should have been paid had interest been calculated in accordance with 8 V.S.A. § 3665, the policy number, and the claim number. The audit shall be provided both in hardcopy and electronically in the form of an Excel spreadsheet. Upon approval, the Company shall refund all underpaid interest owing that exceeded $25.00 at the time benefits were paid.

The 115 noted violations of 8 V.S.A. § 3665 warrant a fine of $1,150.

15. In the "POLICY LOAN INTEREST" section of the Report (page 24), the examiners note a potential violation of 8 V.S.A. § 3731(7), wherein the Company may charge the maximum allowable interest rate on a loan, and then also credit a lesser rate of interest to the loaned portion of the accumulated cash value, than it does for the unloaned value. Effectively, the examiners note, this exceeds the maximum interest rate allowable under the statute. The examiners recommend the Company credit any persons who paid a total effective rate in excess of the maximum rate allowed by statute with the excess charge. The examiners further recommend the Company revise its procedures to prevent exceeding the statutory maximum interest rate.

In its Response (pages 1 0 - 11), the Company asserts the interest rates charged do not violate the law and are, in fact, used in most states with laws analogous to that of Vermont. Further, the Company notes the Department approved the forms in question and that such forms plainly disclose that the interest rate, coupled with the decreased credited rate on the loaned portion of the accumulated cash value, may be more than the statutory maximum, but that the credited rate never drops below the guaranteed rate.6

Moreover, the Company asserts that it maintains a difference of no greater than 2% between the interest and credited rates (i.e., the credited rate on the loaned portion of the accumulated cash value will not be reduced below 6%), even where the credited rate must be increased in order to maintain this 2% spread. However, the Company could not produce written guidelines which establish this methodology.

The Company's methodology for calculating policy loan interest rates, and the accompanying alterations to the interest rate credited to the loaned portion of the accumulated cash value, must be set forth in writing, to ensure that the interest rates are applied uniformly and to facilitate the auditing of such rates by regulators. The Company shall provide the Department with a written procedure for the calculation of interest rates on loans and credit rates on the unloaned accumulation value, within 30 days of the expiration of the appeal deadline of this Order, for the Department's approval. The Department does not adopt this section of the Report, and reserves ruling on this issue pending the Company's submission of the written guidelines.

16. In the "PRODUCER LICENSING" section of the Report (page 25), the examiners note one instance of a producer selling a product for which he was not licensed. The examiners further note two instances where the Company terminated agents, but failed to conform to the requirements of 8 V.S.A. § 4807. The examiners recommend the Company take steps to prevent further producer licensing violations and to assure agents writing variable products are properly licensed.

The Company does not respond to this portion of the Report.

Upon consideration, the Department adopts this portion of the Report and the examiners' recommendation with the following clarification. The Company shall provide, in writing, an explanation of what steps it takes to ensure compliance with Vermont's producer licensing laws. Further, the Company will provide a written description of the procedures employed to ensure that producers, when terminated, are terminated in compliance with 8 V.S.A. § 4813m.7 These materials shall be provided to the Department for approval within 30 days of the expiration of the appeal deadline of this Order. The three violations warrant the imposition of a $1,000 fine.

17. In the "REPLACEMENTS" section of the Report (pages 26 -27), the examiners reviewed a sample of 55 out of 245 files. Of the sampled 55, 22 files contained a document entitled "Acknowledgement and Certification Regarding Sales Illustration" and/or "Computer Screen Illustration Certification" which required the signature of both the applicant and the producer and certified that no hard copy of the sales illustration had been left with the applicant at the time of the sale, but would be provided no later than at the time of policy delivery. The examiners note this is a violation of former Regulation I-88-2 § 6(8)(3)8 which required a producer leave the applicant with an original or copy of the written or printed communications used for presentation with the applicant. The examiners also note one violation of Regulation I-88-3 § 9(C) (requiring a notice of replacement).

The examiners also note the Company conducted an audit which discovered violations of the replacement regulation, all of which were corrected voluntarily by the Company. The examiners recommend the Company revise its procedures to comply with the applicable statutes and regulations.

In its Response, the Company denies that it violated Regulation I-88-2 § 6(8)(3) because those regulations only pertain to "written or printed" communications . Since the Company made its presentations on a computer, no "written or printed" communications were used and the Regulation has no application. The Company also notes that one of the 22 subject files did, in fact, contain a sales illustration that was provided to the customer.

The Department rejects the Company's assertion that a presentation made on a computer does not constitute a "written or printed" communication. To assert that an illustration is not “written or printed" within the meaning of the Regulation because it is displayed initially on a computer screen strains the meaning of these terms as they are commonly understood and certainly violates the spirit of the Regulation. The purpose of this type of regulation (which is common among states) is to provide the prospective customer with an opportunity to review the illustration and sales materials after the pressure of the sales agent has been removed and to further allow the customer time to digest what are often complicated and somewhat confusing numbers. Indeed, the Company defended its miscalculation of the target premiums (supra at p. 5) by asserting that the illustrations were the more valuable tool for customers to compare policies.

The Department adopts this portion of the Report and further adopts the examiners recommendation, subject to the following additional clarifications . The Company shall comply with Regulation I-2001-03 (Vermont's current replacement regulation), including written copies of presentations made on a computer.

This matter warrants a $2,200 penalty, consisting of a $100 penalty for each of the 21 violations discovered by the examiners relating to the sales illustration violation and a $100 fine for the one violation of I-88-2 §9(C).

18. In the "CONSUMER COMPLAINTS" section of Report (pages 28- 29), the examiners reviewed 50 files that had been the subject of complaints during the exam period (this constituted 63% of the total complaints received). Twenty-two percent of the files involved consumer misunderstanding about the Company's "Accelerated Payment Arrangement'' option (“AP arrangement"), which allows the customer to use dividends to pay premiums after the policy has been in force for a period of time. The examiners note that it appears the complaining customers indicated they were led to believe their policies would be fully paid up when they would be eligible for the AP arrangement. The examiners indicate that such a high percentage of complaints on this one issue indicates the likelihood the product is being sold in a misleading fashion. The examiners recommend the Company discontinue the AP arrangement in Vermont.

In response, the Company asserts that the total number of complaints must be looked at in relation to the number of policies issued during the subject period. According to the Company, during the exam period, 1,155 policies were issued.9 Thus, the Company infers that the total number of complaints concerning the Accelerated Payment arrangement was six per year. The Company also notes the complaints concerned policies issued outside of the exam period, thus decreasing the AP complaints per policy issued ratio even further. The Company opines increased media attention may have motivated more customers to complain about their life insurance.

Upon consideration, the Department is not prepared to conclude the AP arrangement is being marketed in a misleading fashion, and does not adopt this portion of the examiners recommendation. However, the complaint activity surrounding this product feature does indicate the possibility of some repeated miscommunication between customers and the Company. Accordingly, the Company shall provide the Department with copies of all marketing materials referring to the AP arrangement used in Vermont from December 31, 1997 until the date of this Order. If marketing materials have been discontinued, the Company must provide the Department with copies, but should indicate the dates of use. The Department will review such materials to ensure that it is not misleading. If it is determined such materials are misleading or potentially misleading, the Department shall issue an Order pursuant to Regulation I-71-3.

ORDER

Based upon the Findings of Fact and Conclusions of Law set forth above, lT IS THEREFORE ORDERED by the Commissioner of the Department of Banking, Insurance, Securities and Health Care Administration that the REPORT OF EXAMINATION OF THE MARKET CONDUCT AFFAIRS OF METROPOLITAN LIFE INSURANCE COMPANY METROPOLITAN L'IISURANCE AND ANNUITY COMPANY METROPOLITAN TOWER LIFE INSURANCE COMPANY SECURITY FIRST LIFE INSURANCE COMPANY BY VERMONT DEPARTMENT OF BANKING, INSURANCE, SECURITIES AND HEALTH CARE ADMINISTRATION (which is incorporated herein by reference) shall be and hereby is adopted with the following modifications and clarifications:

19. As discussed in Paragraph 7 above, the Department adopts the "MULTIDISTRICT LITIGATION" section of the Report, which does not include any recommendations.

20. As discussed in Paragraph 8 above, the Department adopts the "FINES, PENALTIES & FORFEITURES" section of the Report; the Company shall implement procedures to come into compliance with Bulletin 30, and shall submit a signed written description of those procedures no Later than 30 days after the appeal deadline of this Order, for the Department's approval.

20. As discussed in Paragraph 9 above, the Department does not adopt the "SALES AND MARKETING -'Target Premium Issue'" section of the report.

21. As discussed in Paragraph 10 above, discussing the "SUITABILITY ­ Questionable Suitability Cases" and "SUITABILITY - Written standards of Suitability" sections, the Department adopts the Report as modified herein. The Company shall amend its PPS application to include a section for other sources of funding for the PPS, and shall develop a formal plan for supervising the suitability of each sale for the individual client, within 30 days of the expiration of the appeal deadline of this Order, for the Department's approval.

22. As discussed in Paragraph 11 above, discussing the "SUITABILITY OF ANNUITY PURCHASES" section, the Department does not adopt the Report, except as to the uncontested violations of former Regulation I-88-2 and 8 V .S.A. § 3565(b), which warrant the imposition of a $2,000 penalty.

23. As discussed in Paragraph 12 above, the Department adopts the "UNDERWRITING" section of the Report, but does not adopt the recommendations therein.

24. As discussed in Paragraph 13 above, the Department adopts the "POLICY FORM FILINGS" section of the Report, but does not adopt the recommendations therein.

25. As discussed in Paragraph 14 above, the Department adopts the "CLAIMS PROCESSING AND PROCEDURES" section of the Report. The Company shall certify in writing, within 30 days of the expiration of the appeal deadline of this Order, that it has revised its procedures to provide for payment of benefits under the laws of the days of the date of this Order, and shall pay a $1,150.00 penalty. Upon approval, the Company shall refund all underpaid interest owing that exceeded $25.00 at the time benefits were paid.

26. As discussed in Paragraph 15 above, the Department does not adopt the "POLICY LOAN INTEREST" section of the Report, nor the recommendations. Instead, the Company shall have 30 days from the expiration of the appeal deadline of this order within which to submit written procedures for approval.

27. As discussed in Paragraph 16 above, the Department adopts the "PRODUCER LICENSING" section as modified herein. The Company shall provide, in writing, an explanation of what steps it takes to ensure compliance with Vermont's producer licensing laws and a description of the procedures employed to ensure that producers are terminated in compliance with 8 V.S.A. § 4813m, within 30 days of the expiration oftl1e appeal deadline of this Order.

28. As discussed in Paragraph 17 above, the Department adopts the "REPLACEMENTS" section of the Report. The Company shall comply with Regulation I-2001-03, including written copies of presentations made on a computer, and shall pay a $2,200.00 penalty.

29. As discussed in paragraph 18 above, the Department does not adopt the "CONSUMER COMPLAINTS" section of the Report. However, the Company shall provide the Department with copies of all marketing materials referring to the AP arrangement used in Vermont from December 31, 1997 until the date of this Order, within 30 days of the appeal deadline of this Order.

30. All penalties described above shall be paid to the Department no later than 10 days after the expiration of the appeal deadline of this Order, or other administrative or judicial order as appropriate.

PURSUANT TO 8 V.S.A. § 3574(c), THIS ORDER AND REMEDIAL ACTION SET FORTH HEREIN MAY BE APPEALED TO THE COMMISSIONER BY FILING AN ADMINISTRATIVE APPEAL WITHIN THIRTY (3O)DAYS OF THE DATE SET FORTH BELOW. FURTHER REMEDIAL ACTIONS AND PENALTIES ORDERED UPON RECEIPT OF INFORMATION ORDERED HEREIN MAY BE APPEALED WITHIN THIRTY (30) DAYS OF SUBSEQUENT DECISIONS BY THE DEPARTMENT.

1 The Company also notes that after the policy has been issued, the policyholder is provided with a policy summary. However, the focus of the examiners' criticism is on the sale of the policy. Documents provided after the policy is issued are not relevant to this discussion.

2 The Company asserts (at page 12) that it was not required to give written illustrations to prospective customers, which is addressed separately hereafter. If the Company were to continue the practice of relying solely on computer presentations, without providing the prospective customer with a written illustration, then the target premium would appear to be a customer's only basis for comparison, and the understatement of target premiums indeed might be deceptive.

3 The Preference Plus Account has been replaced with the Preference Plus Select annuity.

4 Regulation I-2001-03 replaced I-88-2, effective March 1, 2002.

5 This coincides with the time period since Met Life acquired New England Mutual.

6 “Interest rate" refers to the amount charged on policy loans; "credited rate" refers to the amount of interest paid by the Company on the accumulated cash value of the policy; "guaranteed rate" refers to the minimum credited rate promised by the Company in the policy.

7 8 V.S.A. § 4807 has been amended and functionally replaced by 8 V.S.A. § 4813m.

8 The examiners erroneously cite to I-88-2 § 6(A)(3).

9 The Department notes the Company does not expressly state that all policies were eligible for the Accelerated Payment Arrangement.