Mutual of Omaha Insurance Co. has agreed to pay $1.7 million and adopt new business reforms to resolve allegations that it illegally paid more than $1 million in concealed compensation to brokers in exchange for access to lucrative pension plan business, according to the Connecticut attorney general’s office.
Mutual of Omaha will pay $1.5 million into a restitution fund for certain pension plan customers across the nation that may have been harmed by the alleged scheme. The company will also pay a $195,000 civil penalty to Connecticut.
Since at least 1999, in connection with certain Single Premium Group Annuity contracts, Mutual of Omaha allegedly provided secret compensation to a group of SPGA brokers, including USI Consulting Group of Glastonbury.
As Mutual of Omaha outlined in one of its own internal communications, the hidden payments enabled them “to provide additional compensation to valued producers and compete with the additional commission programs offered by other insurers.” In return for the payments, the company received competitive information and “last look” bidding opportunities not provided to carriers that declined to pay secret compensation to brokers.
“More than the money, today’s settlement provides sweeping business reforms to prevent artificially inflated pension plan costs,” Attorney General Richard Blumenthal said in a statement. “Mutual paid illegal secret payments – lucrative incentives for brokers to funnel customers to Mutual. These hidden payments were disguised as ‘expense reimbursements’ and ‘administrative costs.’ In reality, these hidden payments to brokers were loaded into premium costs for private and public pension plans nationwide, and skewed the market to favor only the select carriers who provided these illegal payments.”
