Don't cry for Snoopy's company just yet, though; That $1.7 billion isn't all going to its customers. Although lawyers' fees could top $100 million, the company hopes to pay most of those 7 million customers in additional coverage rather than in cash. In such a scenario, the payout is based on what it would cost consumers to buy that additional coverage, not what it is costing the company to provide it. And execs have already bought settlement insurance to take care of that amount. Most important, the deal gives Met Life a clean slate as it heads into its big IPO, which, if successful, could easily cover the cost of this and any future settlements.
"Get Met. It Pays" was never more true than Wednesday, when the nation's second-largest life insurer agreed to pay a megamillion-dollar settlement of lawsuits accusing the company of deceptive sales practices. Pending a federal judge's approval, Metropolitan Life says it will distribute $1.7 billion to some 7 million people who bought insurance and annuities between 1982 and 1997. This agreement will take care of a collection of class-action suits brought by the feds and private citizens, and is the latest in a long line of settlements by large insurers over questionable sales tactics. Example: "churning," in which a salesman gets you to finance a bigger, more expensive new policy with the cash you've accumulated in your old one. In 1996 Prudential agreed to pay as much as $2 billion in a similar case.