California’s insurance department intends to revoke or suspend licenses issued to Wells Fargo following sales practices that were deemed improper. This was with regards to Wells Fargo’s website-based insurance referral program. According to an investigation conducted by California’s insurance department insurance policies numbering 1,500 had been issued by Wells Fargo and customers charged premiums without their consent or knowledge.
The investigation was launched following allegations from ex-employees of Prudential, an insurer based in New Jersey, that the lender had improperly signed up clients for life insurance. Wells Fargo does not provide its own personal insurance policies but acts as a broker for third party carriers including American Modern Insurance Group, Prudential and several other firms.
Personal insurance business
Last week the third-biggest lender in the United States in assets disclosed that it would be exiting the personal insurance market. The market includes umbrella insurance products as well as renters, homeowners and auto insurance. Consequently the U.S. lender will start winding down the promotion and marketing activities of its personal insurance products. Other insurance businesses that Wells Fargo has exited include crop insurance.
According to a spokesperson for Wells Fargo, Catherine Pulley, the decision to exit personal insurance had nothing to do with the investigation by California’s insurance department. Pulley however apologized for the insurance sales practices of the bank.
“We are sorry for any harm this caused our customers and we are making things right for them as part of an ongoing remediation. We will continue to make critical changes to our businesses and operations…” said Pulley.
Auto loans insurance
Wells Fargo has previously faced other insurance problems that are unrelated to the insurance referral program it operates. Earlier in the year the lender disclosed that thousands of customers for its auto loans had been improperly charged for vehicle insurance policies which they didn’t need.
As part of a settlement Wells Fargo agreed to refund $80 million as well as compensate victims of the practice. This included 20,000 customers who had their vehicles repossessed after they fell into default due to the financial burden the unneeded insurance policies added to their payment obligations. In 2016 Wells Fargo generated $1.3 billion from its insurance business.
For over a year, Wells Fargo has tried to recover from the sales scandal which hit a couple of its consumer businesses. Last year the lender paid fines to regulators totaling $185 million after it was found to have fraudulently opened credit card and deposit accounts.