Hartford Basically Pays Each Claimant For Fine
Hartford pays $72 million penalty for an Annuity administrative charge. The Hartford was recently assessed a huge fine. I was surprised to see why the company was fined. It was for basically setting up settlement annuities (including Workers Comp) and charging a 15% administration fee from their own life insurance company. After reading a few of the articles, I came to the conclusion that all annuities made Hartford a 15% profit from the claimants.
The Hartford is basically going to pay each claimant a $3,250 check. My main question would be what profit was made from this versus the fine. Annuities are a great way to settle any type of insurance claim where the claimant wanted to make sure they would receive a lifetime benefit. I always liked shifting the administrative burden of paying lifetime checks to a company that specializes in paying timely benefits.
The other part of an annuity is that you are purchasing a payment instrument at a discounted present value. The provider of the annuity knows that the future value of money is less than what money is worth today. I really do not understand what the 15% fee was for as Hartford would still have made a large profit on playing the spread between the annuity purchase price and what they would have actually had to pay out over time.
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