A Florida-based health insurance distributor and its former CEO will pay a combined total of more than $12 million to resolve allegations that they misrepresented the strength of the business' compliance program while also deceiving investors about the volume of customer complaints the company had received.
Health Insurance Innovations (HII) and its former CEO Gavin Southwell were found guilty of a series of misrepresentations by the Securities and Exchange Commission (SEC) regarding customer complaints made against the firm and one of its major distributors. According to the SEC's order, HII's compliance division kept track of more than 24,000 complaints from 2017 to 2019 about third-party insurance agents hired by HII who were misrepresenting plans, failing to cancel them when customers requested them, and billing customers for products they had not authorized.
The SEC claimed that despite this, Southwell and HII boasted to investors about the company's 99.99 percent customer satisfaction rate.
According to the court order, the company's compliance division sent Southwell "emails, spreadsheets, and PowerPoint presentations, indicating there were persistent problems at HII’s distributors and a large volume of consumer complaints."
The SEC provided the following example: "In September 2017, outhwell received an email from HII’s compliance and risk officers about a series of reports of consumers requesting cancellations, where the agents either refused to cancel or said the cancellations had been made when in fact they were not. Nevertheless, Southwell failed to determine the magnitude of complaints and chargebacks tracked by HII or otherwise verify that his statements about consumer satisfaction and complaints were accurate before making them."
According to the SEC, the company increased funding for its compliance department, and HII and Southwell assured investors and the general public that the company had strict compliance standards and went to great lengths to test them. That was untrue, according to the agency. Additionally, the company misled investors and the general public by claiming to have severed ties with two distributors for noncompliance.
The SEC claimed that withholding information about HII's actual performance prevented the stock price of the company from declining.
According to the SEC, HII and Southwell's actions broke federal securities laws' antifraud and reporting provisions, and Southwell "profited by selling HII stock when it was inflated as a result of the misconduct." HII agreed to pay $11 million and more than $1 million to Southwell to settle the allegations without disputing or admitting the agency's findings.
Since then, HII has changed its name to Benefytt Technologies, according to a press release from the SEC.
A request for comment from Benefytt Technologies was not responded to.
By fLEXI tEAM