Class Action Claims Ohio National Burned Brokers by Terminating Commission Payments

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The Ohio National Life Insurance Company is on the receiving end of a proposed class action that takes issue with the insurance company’s sudden termination of commission payments to sellers of its variable annuity contracts with a Guaranteed Minimum Income Benefit Rider (GMIB).

Also filed against Ohio National Life Assurance Corporation; Ohio National Equities, Inc.; and Ohio National Financial Services, Inc., the lawsuit explains the defendants entered into selling agreements with independent brokers/dealers such as the plaintiff company whereby the insurance conglomerate defendants promised to pay commissions on contracts sold to clients. The contract at issue in the lawsuit is the defendants’ GMIB annuity contract, which the case explains offers clients a guaranteed income throughout their lifetimes paid through a percentage of either the account’s value or a fixed guaranteed minimum, whichever is higher.

After selling a GMIB contract to a client, brokers can choose between three different commission payment schedules, the suit continues, one of which offers trail commissions based on a percentage of premiums paid by the customer and the earnings on those premiums. Trail commissions are deferred by a year, according to the lawsuit, and continue until the contract is annuitized or surrendered.

Around September 2018, the lawsuit alleges, the defendants decided the contacts were becoming unprofitable and attempted to “exit as many existing GMIB Annuity Contracts as possible” by terminating proposed class members’ commission payments. This move, according to the lawsuit, forced brokers who worked for the plaintiff to choose between abandoning their clients or shouldering the costs associated with helping clients transfer to alternative financial products. If the clients decided not to purchase alternative products, the case says, brokers could continue to service their contracts but would receive no compensation.

The lawsuit argues that Ohio National’s termination of commissions violates the terms of the brokers’ selling agreements and robs them of money to which they are entitled. The agreements, the complaint states, guarantee payment as long as the contract is active and “until the contract is surrendered or annuitized.”

The case argues that the defendants’ conduct has allowed them to pocket “tens of millions of trail commissions” and subjected proposed class members to “irreparable harm,” including the “loss of goodwill” and a negative impact on their reputations.