A Florida-based health insurance distributor and its former chief executive officer will pay a total of more than $12 million to settle charges of misrepresenting the robustness of the company’s compliance program while simultaneously misleading investors about numerous customer complaints lodged against it.
The Securities and Exchange Commission (SEC) found Health Insurance Innovations (HII) and its former CEO Gavin Southwell made a series of misrepresentations about consumer complaints lodged against the company and one of its main distributors. HII’s compliance department tracked more than 24,000 complaints from 2017-19 regarding third-party insurance agents hired by HII that were misrepresenting plans, failed to cancel plans when customers requested, and charged customers for products they didn’t authorize, according to the SEC’s order.
Yet, Southwell and HII boasted to investors the company had a 99.99 percent consumer satisfaction rate, the SEC alleged.
The company’s compliance department reported problems to Southwell via “emails, spreadsheets, and PowerPoint presentations, indicating there were persistent problems at HII’s distributors and a large volume of consumer complaints,” the order said.
The SEC offered the following example: “[I]n September 2017, Southwell 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.”
The company increased funding to its compliance department, the SEC said, and HII and Southwell told investors and the public the company held high compliance standards and took great pains to test those standards. The agency found that to be untrue. The company also told investors and the public it had severed ties with two distributors for noncompliance when it allegedly had not.
Withholding the information about HII’s true performance prevented the company’s stock value from dropping, the SEC said.
The SEC said HII’s and Southwell’s conduct violated antifraud and reporting provisions of the federal securities laws and that Southwell “profited by selling HII stock when it was inflated as a result of the misconduct.” Without admitting or denying the agency’s findings, HII agreed to pay $11 million and Southwell more than $1 million to settle the charges.
HII has since become private and renamed itself Benefytt Technologies, the SEC said in a press release.
Benefytt Technologies did not return a request for comment.