Feds widen probe into insurance marketing after MetLife suit

Regulators in three U.S. states have started or widened examinations of how life insurers pay beneficiaries after a federal judge described MetLife Inc.'s marketing of asset accounts as "inherently deceptive," even as he dismissed the underlying suit against the company.

The Sept. 10 statement by U.S. District Judge Larry Hicks in Reno, Nevada, may prompt regulators in that state, California and Georgia to use their broad legal powers to impose changes on insurers' marketing, disclosures and practices.

Hicks said MetLife, the biggest U.S. life insurer, gave consumers the misimpression that its Total Control Account Money Market Option account for death benefits was insured by the Federal Deposit Insurance Corp. Still, he threw out the suit, which claimed the insurer unfairly profited on the policy, saying the beneficiary had not lost money. Locally, MetLife has operations in Downers Grove and Aurora.

"This statement that the accounts are 'inherently deceptive' -- that's something that raises great concern in my mind," Nevada Insurance Commissioner Brett Barratt said in an interview. "They are strong words."

The U.S. House Oversight and Reform Committee and New York Attorney General Andrew Cuomo previously started investigations of so-called retained-asset accounts after Bloomberg Markets magazine reported in July that carriers profit by holding and investing $28 billion owed to beneficiaries.

"An ordinary reasonable person, provided with the contracts at issue, would be under the impression that they were receiving either a money-market account or an account associated with money market protections," Hicks wrote.

John Calagna, a spokesman for New York-based MetLife, said the company is cooperating with pending investigations and that the ruling dismissing the lawsuit was "completely" in the firm's favor.

"Insurers have prevailed in almost all of these lawsuits," Calagna said. "There's a message there -- that these accounts provide a benefit."

The account is now called a Total Control Account, without the words "money market," Calagna said. Curtis Coulter, a lawyer for plaintiff Jamie Clark, said he's appealing the dismissal.

The case is Clark v. Metropolitan Life Insurance Co., 08- cv-158, U.S. District Court, District of Nevada (Reno).