Global insurer
AXA’s US unit came under fire Monday after New York State’s Department of Financial Services (DFS) fined the carrier $20 million—the largest fine ever issued against an insurance company in the state.
The department claims AXA Equitable Life Insurance Co. failed to provide adequate notice that it would make changes in certain of its retirement-income contracts, including variable annuity accounts, which limited customers’ investment return.
“[AXA Equitable] failed to inform and adequately explain to DFS the significance of the changes caused by introduction and application” of the investment strategy changes, the state said. This supposedly limited the state’s ability to put adequate consumer protections in place, including requiring existing customers to affirmatively “opt in” to the altered investment plan.
AXA’s changes to its variable annuity accounts called for implementation of its Tactical Manager strategy (ATM Strategy). In its filings with DFS, officials say the insurer did not adequately address how current policyholders who had not chosen to invest in the ATM Strategy could end up invested in the funds.
While the ATM Strategy is designed to protect investors’ returns during periods of market volatility, it may limit the gains of policyholders not invested in the ATM Strategy plans.
Tens of thousands of New Yorkers were affected by the changes, said Superintendent of Financial Services Benjamin Lawsky.
“When it comes to retirement products, insurers must go above and beyond to explain any changes that would alter investor returns,” Lawsky said. “Here, AXA changed the rules on these important products midstream and should have done more to disclose those changes to the Department.”
New York Gov. Andrew Cuomo echoed Lawsky’s statements and expressed confidence that the $20mn fine would “send a message that failing to [be clear and upfront with their regulators] is simply unacceptable.”
AXA apologized for the incident, saying it “should have communicated better to NYDFS” when it made “certain technical filings required under New York law.”
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