The California Department of Insurance alleges Wells Fargo sold policies to 1,500 consumers without their permission between 2008 and 2016.Following a string of scandals, Wells Fargo now faces a possible suspension or revocation of its insurance license in California after an investigation by the state’s Department of Insurance uncovered what it alleges were unauthorized policy sales to some 1,500 consumers between 2008 and 2016. According to the agency, the bank sold renter’s insurance and term life policies through an online referral program that included four different insurers without obtaining permission from the bank’s customers, who were subsequently charged premiums.
“Companies that are licensed to transact insurance have an obligation to act with integrity, comply with all state and insurance laws and represent the best interests of consumers,” California Insurance Commissioner Dave Jones said. “When any producer violates consumer trust in the name of profit, it reflects poorly on the entire profession.”
Wells Fargo released a statement saying that it disbanded the online referral program in late 2016 and undertaken an internal review of the matter. The bank added that it has cooperated with the state’s insurance regulators for about a year. “We are sorry for any harm this caused our customers and we are making things right for them as part of an ongoing remediation,” the bank statement said.
Bank Exits Persona, Commercial Insurance
California’s disclosure of its investigation into Wells Fargo’s insurance sales practices came on the heels of an announcement in late November that the bank will end all of its personal coverage lines, including auto, homeowner, renters, and umbrella personal insurance products, by the first quarter of next year. The bank will continue to provide its personal insurance products prior to that date.
Coupled with its recently closed deal to sell its commercial insurance unit to USI Insurance Services, the decision to exit from the personal insurance lines effectively shutters all of the Wells Fargo’s insurance operations. Wells Fargo reportedly expects to gain $2 billion from the sale to USI.
Known as Wells Fargo Insurance Services USA, the commercial division included the bank’s commercial insurance brokerage and consulting business, employee benefits, and property and casualty national practices. USI also acquired the bank’s Safehold Special Risk, small business insurance, student insurance, individual health, and private risk management insurance lines.
In addition, the bank agreed last month to sell its crop insurance brokerage operations to Hub International Limited. In 2015, Wells Fargo divested its crop insurance business, Rural Community Insurance Services, and its subsidiary, Rural Community Insurance Co. Zurich American Insurance Co., a subsidiary of Zurich Insurance Group, picked up that division.
Troubles in Auto Lending, Mortgage Units
The insurance divestitures and the California allegations are the latest in a series of highly publicized missteps by the bank. In August, Wells Fargo agreed to pay $80 million to bank customers who had been charged for duplicate auto insurance. As many as 800,000 clients were billed for car insurance even though they already owned an auto policy.
Also in the summer, the bank revealed that it had extended the terms of mortgage loans in default without informing the borrowers. Despite lowering monthly fees, borrowers were burdened with a higher loan total because the mortgage payments stretched over a longer period of time.
Those scandals came after the bank was fined $190 million by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the Office of the Los Angeles City Attorney following a revelation that bank employees opened 2.1 million customer accounts without permission. The bank’s CEO resigned and 5,000 employees were fired when the scandal came to light.