Insurer Prudential Financial said Monday that it will stop distributing “MyTerm” insurance policies through Wells Fargo’s branches and website, pending a review of how the bank sells the product.
The announcement by Newark, N.J.-based Prudential is the latest fallout for the San Francisco-based bank over a phony accounts scandal that became national news this fall, raising questions about how Wells Fargo’s employees sold a product from a third-party company.
Prudential’s decision comes after Bloomberg News reported Friday that the insurer had been accused by former employees of covering up fraudulent sales of life insurance policies through Wells Fargo to low-income customers. Many of the customers, who often had Hispanic last names, didn’t know what they had purchased, Bloomberg reported, citing a lawsuit the employees filed in New Jersey state court.
MyTerm, launched in 2007, is a simplified term insurance product that Prudential began selling through Wells Frago in 2014, using self-service kiosks in branches and through the bank’s website.
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Prudential said it surveyed Wells Fargo customers last year about their experience, and the responses did not indicate fraudulent activity. But after Wells reached an $185 million settlement this fall over its sales practices the company expanded its review and asked Wells for help gathering information, the insurer said.
“We stand behind the MyTerm product but have decided to suspend sales of that product through Wells Fargo’s retail banking franchise until we have all the facts about whether it is being distributed properly and in the best interest of customers,” said Steve Pelletier, executive vice president and chief operating officer of Prudential’s U.S. Businesses.
If MyTerm customers have any concerns about the way the product was purchased, Prudential will reimburse the full amount of the premiums paid and cancel the policies. Customers can call a Prudential hotline at (877) 291-7193.
Wells is “deeply concerned about these allegations as they are completely counter to our values and our commitment to providing customers only the products and services they need and want.” Wells is working with Prudential to investigate any “unauthorized or inappropriate referrals that may have occurred” and is stopping sales and referrals related to the product until the investigation is completed, he said.
Folk noted that the bank has previously eliminated sales goals for retail bankers and has begun a third-party review of its community bank sales practices, as required under its consent order with regulators. The bank is also having a third-party review sales practices company-wide.
On Sept. 8, Wells agreed to pay $185 million in fines over allegations of “widespread illegal” sales practices that dated to at least 2011. Regulators said bank employees, racing to meet aggressive sales goals, opened 2 million accounts that may not have been authorized by customers.
Last week, the Financial Industry Regulatory Authority said it was asking former Wells Fargo bank employees whose securities registrations were terminated to get in touch with the regulator if they have concerns about how Wells Fargo reported their firings. Wells Fargo is also expected to receive a significant downgrade on a closely watched scorecard for community lending, according to news reports.
Bloomberg News contributed