Minnesota Attorney General Lori Swanson is back in the saddle again, and this time she’s going after Midland National Life Insurance Company. The lawsuit recently filed in Hennepin County District Court marks the third time in 2007 that Swanson has placed a major life insurer in her sights as a result of alleged deceptive sales of annuities to senior citizens.

Swanson has made a name for herself testifying before Congress on abusive sales practices. She also had great success in getting Allianz Life Insurance Company—which BestWire recently hailed as “the biggest U.S. seller of equity-indexed annuities”—to settle the suit she filed against it in January over similar annuity sales practices. As the champion of beleaguered senior investors everywhere, Swanson is definitely getting a lot of good press.

The most remarkable thing about Swanson’s hard line approach of filing lawsuits (and holding press conferences) first and meeting with insurers to hear their side of the story later is the Minnesota suitability statute itself. Minn. Stat. § 72A.20, subdivision 34 is exceptionally vague in that it fails to define suitability or describe the processes that should be used in determining whether an insurer’s annuity products or their agents' sales practices are unsuitable. 

In spite of their deep pockets, insurers don’t like to go up against regulators and attorneys general. These disputes can cause more harm in the long run as regulators (especially regulators with deep political motives) campaign against insurers’ alleged bad practices.

However, the word among some of my industry contacts is that American Equity Investment Life Insurance Co., the other top seller of equity-indexed annuities that Swanson sued in April, may put up more of a struggle (than Allianz did). If American Equity (and/or Midland National) rejects the conciliatory approach that Allianz followed, Swanson will be forced to expend a good amount of her department’s resources to engage in discovery, take depositions and do whatever else is necessary to see these cases through to completion.

In addition to litigation costs, increased premiums and what may be some undeserved bad press for the life industry, there will no doubt be significant compliance costs associated with all of this. Is it time for the industry to challenge Swanson’s tactics and circle the wagons for a fight?