Prudential stops distribution of policy sold through Wells Fargo

Features Reuters

U.S. insurer Prudential Financial Inc said on Monday it had suspended the distribution of a low-cost life insurance policy through Wells Fargo & Co , pending a review of how the product was sold by the bank.

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California Insurance Commissioner Dave Jones told Reuters on Monday he has ordered an investigation into allegations retail bankers at Wells Fargo signed up customers for life insurance policies from Prudential without their permission.

The New Jersey Division of Insurance is also investigating, according to a news release from Jones's office. Spokesmen for the New Jersey office had no immediate comment.

The allegations are part of a wrongful termination lawsuit filed by three former managers in Prudential's corporate investigation division. The lawsuit was filed in New Jersey state court last week.

A class action suit against Prudential was also filed Monday in the U.S. District Court for the District of New Jersey on behalf of Wells Fargo customers who say they were unknowingly signed up for Prudential policies.

Wells Fargo's sales practices have been under a spotlight since September when regulators ordered the bank to pay $190 million in fines and restitution to settle charges that its employees opened as many as 2 million deposit and credit card accounts without customers' permission.

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Prudential has worked with Wells Fargo since 2014 to sell the term insurance policy, known as MyTerm, to the bank's retail customers.

Wells Fargo employees were meant to direct customers to either self-service kiosks in branches or online to buy the insurance, without getting into specifics about the products because bankers are not licensed to sell insurance.

Customer responses in a survey conducted last year did not indicate potential fraudulent activity, Prudential said.

Prudential also said it had asked for Wells Fargo's assistance in gathering all the necessary facts.

Former Wells Fargo employees have blamed the San Francisco-based bank's high-pressure sales environment for its role in creating the unauthorized accounts.

Some state and local governments have also suspended business with Wells Fargo, including the Pennsylvania Treasury Department.

(Reporting by Richa Naidu, Suzanne Barlyn and Dan Freed; Editing by Martina D'Couto and Jonathan Oatis)