On March 31, 2014, Benjamin M. Lawsky, Superintendent of the New York Department of Financial Services ("NYDFS") announced an Agreement under which MetLife will pay $60 million for insurance licensing violations by two of its subsidiaries, American Life Insurance Company ("ALICO") and Delaware American Life Insurance Company ("DelAm").
Investigations by the NYDFS and the Manhattan District Attorney's Office discovered that ALICO and DelAm unlawfully transacted the business of insurance in New York without a license and allegedly made intentional misrepresentations to the NYDFS about their unlicensed activities. The Agreement requires that the insurers and their agents operating out of New York become licensed.
MetLife acquired ALICO and DelAm from AIG in 2010. The NYDFS' investigation is still ongoing and has not been resolved. According to the NYDFS, MetLife has agreed to cooperate with the NYDFS' investigation concerning the alleged insurance law violations, which occurred prior to MetLife's acquisition of ALICO and DelAm.
While the penalty assessed by the NYDFS against MetLife is exceptionally large, there are numerous instances where state insurance regulators in New York and other states have imposed monetary penalties or fines against unlicensed or unregistered entities transacting insurance business in their respective jurisdictions. Additionally, if an unlicensed insurance entity is disciplined by an insurance regulator in one state, the action is generally reported to a national database maintained by the National Association of Insurance Commissioners, which may alert other states that there might be a problem. Consequently, it is extremely important for insurers, insurance agencies, third party administrators, adjusters, pharmacy benefit managers and various other insurance related entities to be licensed before transacting business in a state.
In addition to potential regulatory liabilities for operating without a license, unlicensed insurance entities may also have contractual issues or liabilities with their business partners for not being properly licensed where required.