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Prudential Ditches Policy Wells Fargo Allegedly Oversold

Prudential said on Monday it had suspended the distribution of a low-cost life insurance policy through Wells Fargo, pending a review of how the product was sold by the bank.

California Insurance Commissioner Dave Jones told Reuters on Monday he had ordered an investigation into allegations that retail bankers signed up customers for life insurance policies from Prudential without their permission.

Could Prudential Be Involved With Larger Wells Fargo Scandal? 1:47

The New Jersey Division of Insurance is also investigating, according to a Prudential spokesman and a news release from Jones's office. Spokesmen for the New Jersey office had no immediate comment.

The allegations are part of a wrongful termination lawsuit filed by three former managers in Prudential's corporate investigation division. The lawsuit was filed in New Jersey state court last week.

A class action suit against Prudential was also filed Monday in the U.S. District Court for the District of New Jersey on behalf of Wells Fargo customers who say they were unknowingly signed up for Prudential policies.

Prudential spokesman Scot Hoffman said the insurer is "in active discussions with the New Jersey Department of Insurance" about its review of the product Prudential sells through Wells Fargo, called MyTerm, and is responding to the regulators' requests for information.

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Regarding the class action suit, Hoffman said "Prudential believes the suit is totally without merit and will vigorously defend itself."

Separately, Wells Fargo said on Monday it has suspended referrals of renters' insurance to another carrier, pending a review of how the products were sold by the bank.

Wells Fargo spokesman Mark Folk declined to name the Wells Fargo partner that sells renter's insurance, but the bank's website indicates it offers the policies through Assurant. An Assurant spokeswoman said the company did not comment on clients.

Wells Fargo's sales practices have been under a spotlight since September when regulators ordered the bank to pay $190 million in fines and restitution to settle charges that its employees opened as many as 2 million deposit and credit card accounts without customers' permission.