Prudential Executives Knew of Sales Abuses

Prudential Insurance Co. of America said its executives knew before 1992 that agents used deceptive sales tactics and failed to stop the practice. Though Prudential took steps to halt the abuses at the time, “in hindsight, those steps were not enough,” spokesman Robert DeFillippo said in an interview. The firm, the largest U.S. life insurer, last year agreed to pay at least $410 million to settle with policyholders who say they were misled from 1982 to 1995. Although state regulators said at the time of the settlement that the firm’s executives knew of the abuses as early as 1992, a Wall Street Journal report said internal audit documents show directors were warned of the problems at least as early as 1982. Prudential’s agents used “churning,” in which customers were convinced to buy new policies using the accumulated value of existing ones, solely to generate commissions. Agents led customers to believe wrongly that old policies could pay off the new policies’ premiums. Though Newark, N.J.-based Prudential refused to say when it knew of the improper behavior, DeFillippo admitted it was before 1992.