Governor aide gets censured
Rebuke related to insurance job
An adviser to Gov. Asa Hutchinson who deals with insurance matters has been reprimanded by the Arkansas Insurance Department over findings of inappropriate sales tactics in his previous job of selling policies for Washington National Insurance Co.
In an Oct. 16 letter of reprimand, the department said Carlton Saffa provided confusing and misleading information on the status of old policies, cost of new policies and insurance premium returns.
The department found “suitability issues” — meaning people were sold insurance unsuitable to their financial means or needs — and “potential misrepresentation and alleged fraud.”
The actions are a violation of the state Trade Practices Act, according to the letter. The act pertains to the insurance business.
Department records obtained through the Arkansas Freedom of Information Act indicate that about 15 complaints had been filed against Saffa since 2012.
According to the Department of Finance and Administration’s website, Saffa — who lives in Little Rock — began working for
the governor on Jan. 13. He makes $90,900 a year.
Five days after he joined the governor’s office, he terminated his contract with Washington National Insurance. He surrendered his insurance license in April, the same month the legal division of the Insurance Department began investigating him.
The reprimand states that if Saffa wanted to renew his license, “the Department will consider the allegations of the complaints” and will require six hours of continuing education in ethics, “preferably with a focus on suitability and misrepresentation.”
In response to questions to the governor’s office, spokesman J.R. Davis said Saffa “works on a broad range of policy issues. He has done work on insurance matters among other issues.” Davis said Wednesday that Saffa declined to comment.
Saffa referred to his work with the department in a transcript of an Oct. 1 conference. Saffa told Taryn Lewis, an investigator with the Insurance Department, and Suzanne Tipton, a deputy commissioner, “I handle everything you touch, as you all know, you and I are in a lot of meetings together.”
The letter of reprimand was in response to complaints from customers Chorsie Burns, Judy Perkins, Gloria McGuire, and Lou and Herbert Daniels, said Kenneth Ryan James, an Insurance Department spokesman.
Documents also show Saffa was being investigated by Washington National Insurance. It had two open and two closed complaints against Saffa in April, when the state opened its investigation.
The company found Saffa “told the consumer a lie to obtain a higher premium policy,” according to an Insurance Department memo.
In another instance investigated by the company, a customer said Saffa canceled her policy without approval. The customer reviewed a signed cancellation form for her account, but it “was not her signature.”
R. Scottie Lee, president of a work-site marketing division of a Washington National Insurance subsidiary, wrote to the Insurance Department on Sept. 28 to support Saffa.
“It is my opinion, that Carlton would never purposely or maliciously mislead a consumer or misrepresent himself or the company he was representing.”
Lee said insurance agents conduct thousands of transactions a year and a few misunderstandings are bound to occur.
A COMPLAINT
All Perkins of Taylor wanted to do when her cancer policy matured in 2014 was renew coverage and add her husband to the policy, she told Insurance Department investigators.
Over 25 years, Perkins had paid a total of $12,841.15 for the policy, according to a letter from the insurance company. She had never filed a claim and because of a policy provision, the company owed back everything she had paid.
Washington National provided to the Insurance Department a copy of a letter to Perkins that included the amount owed.
Saffa and Perkins told investigators different accounts of how much Perkins was to receive. Saffa said he told Perkins that she was to be paid the full amount — $12,841.16, according to a department report. However, Perkins said Saffa told her she was owed $2,168.50.
Saffa and Perkins agreed that Saffa filled out a draft for $2,168.50 and Perkins signed it — a practice that was “inappropriate,” the insurance company said in a letter to the department.
Perkins told the department that she agreed to a $65-a-month plan — including $15 a month to add her husband — and that’s it.
Instead, $10,673 from her returned premium was immediately paid toward multiple new policies, according to a department report. She told the department she did not sign a check or an application authorizing the transfer. She said she didn’t know she was owed that much money.
After a year, she received bills for $889.40 a month, she told the department.
“She said, I was very clear, I cannot afford that many policies … all I wanted to do was just add my husband for $15 more a month and then she ended up paying $10,000 a year for all these policies when before she was only paying $1,600 a year,” said Lewis, the Insurance Department investigator, in the investigation’s transcript. “She needed a new roof with that $10,000. She didn’t know that she had all that additional money.”
Other complaints followed a similar outline.
“She and, along with the other ones, she claims the only check that she saw was the one that was made payable to her,” Lewis said in the transcript, referring to another customer. “She never saw or signed the check that was for the premium made payable to Washington National.”
“The problem I’m having with that is, one misunderstanding, okay, two misunderstanding[s], okay, this many misunderstandings, something[’]s wrong.”
Some of the complainants also said they never signed paperwork canceling their old policies.
“If these people were put under the impression that they couldn’t continue their old policy, someone’s gonna have to cancel the policy,” Lewis said.
SAFFA’S ACCOUNT
Saffa’s job involved delivering money to insurance customers who had mature accounts and selling additional insurance, he told the Insurance Department.
He explained to insurance investigators that for certain policies — including cancer, heart and accident — consumers can receive their money back if they don’t draw down a policy after a set amount of time.
The returned premiums were deposited into a money market account that customers could access from a draft book.
Saffa told the Insurance Department that he hand-delivered “kits” containing the draft books — similar to a check book — if the customers were interested in discussing purchasing additional insurance. Otherwise, he mailed the kits.
Customers could use the drafts to buy additional insurance, transfer money to their savings accounts or make purchases that were over $250.
In the department’s transcribed interview, Saffa said, “the company designed it that way in an attempt to generate more sells,” and “the hope was that we could then take some of the premiums that we were returning and put them back into additional products.”
Additionally, Saffa said he hand-delivered the kits to ensure that the people received the money.
“You know, I’ve had people hang up on me. I’ve had people think it was a Nigerian phishing scam,” he said. “I mean I’ve had everything you could think of. I’d say probably half the folks I ever contacted had no idea that they even had the money coming.”
In the interview, Saffa said he never signed premium checks for customers, but he sometimes did write out information on the checks. He said that’s a customary practice among the elderly and in rural areas.
Saffa told Lewis that he believed customers were confused when renewal notices hit after a year. Customers who put the returned money toward new policies had the first year’s premiums automatically withdrawn.
He said he provided copies of all the paperwork to customers.
“It’s always that renewal date,” he said. “There’s that sticker shock upon renewal, and it seems like that’s where we’re generating … most of the questions.”
Saffa started with the company on May 25, 2001. He was 19 years old at the time.
The insurance commissioner may place on probation, suspend, revoke or refuse to issue or renew an insurance producer’s license or may levy a civil penalty, according to state statute 2364-512.
“We are leaning towards what is possibly revocation instead of a straight surrender of your license, and that’s something that you can agree to and do a consent order,” said Tipton, the deputy commissioner, in the transcribed interview with Saffa.
Saffa said he did not plan to re-enter the insurance business and asked to sign a reprimand.
“There are ripple effects that can occur on the difference between revocation and reprimand,” Saffa said. “I understand I’m being recorded when I say that.”
Tipton said that “was a perfectly good concern.”
Then the interviewers cut off the tape recorder.