Transamerica sued for cost increases on universal life insurance contracts
Transamerica along with other insurers have upped costs on in-force policies.
A California-based consumer group, Consumer Watchdog, has filed a class-action lawsuit in Los Angeles against Transamerica Life Insurance Company for the COI increases. According to information gathered from the organization’s website, “Transamerica breached its contract and acted in bad faith by raising the charges as a pretext to avoid or offset its obligation to pay guaranteed monthly interest payments to the policyholders. According to the complaint, because people are now living longer, the cost of insurance under the policies is lower than when the policies were issued; yet Transamerica is attempting to collect increased monthly deductions from the policyholders.”
Transamerica was effectively guaranteeing a 5.5% crediting rate on some universal life policies. The lawsuit alleges that Transamerica raised the COI on policies, “falsely stating that the increase was permitted by the terms of their policies.” The suit alleges that the COI increase was not about increasing mortality costs; “Transamerica’s reasons for the premium increase may have been to subsidize its cost of meeting its interest guarantee, to recoup past losses on the policies and on its investment portfolio, and to make the policies more profitable by inducing policy terminations by those policyholders who could not afford the increase.” According to the suit, Transamerica is trying to “avoid its contractual obligation to meet the high interest crediting rates it promised.”
The suit points out that in its reports and answers to regulators, Transamerica never mentioned any “adverse changes in its current expectations regarding future costs of insurance,” and, further, that Transamerica’s investment returns are “nowhere near the returns needed to support continued interest credit to the Policies’ accumulation account at the guaranteed 5.5% effective rate.” The suit goes on to say that since non-guaranteed elements such as the COI “are required to reflect expectations of future [emphasis theirs] experience, Transamerica is precluded from redetermining those elements to recoup past losses. To do so would violate the actuarial standards of practice and code of professional ethics.”
The lawsuit alleges that Transamerica increased the costs to “force its insureds to surrender [cancel] their Policies” in order to “reduce the size of an unprofitable block of life insurance policies.”
The lawsuit is seeking a reversal of the COI increases as well as compensatory and punitive damages to be paid to the affected policyholders. In addition, the suit seeks the reinstatement of policies that were cancelled or surrendered.
This is now the fourth life insurance company to raise cost of insurance rates on inforce policies. I have written extensively on this topic and I am available to provide counsel about the best options going forward. If you are a Transamerica policyowner or if you are a C.P.A. or attorney with clients who needs help evaluating inforce permanent life insurance policies, please contact me at Life Insurance Concepts in Boca Raton, Florida. I can be reached at 561-988-8984.
Transamerica was effectively guaranteeing a 5.5% crediting rate on some universal life policies. The lawsuit alleges that Transamerica raised the COI on policies, “falsely stating that the increase was permitted by the terms of their policies.” The suit alleges that the COI increase was not about increasing mortality costs; “Transamerica’s reasons for the premium increase may have been to subsidize its cost of meeting its interest guarantee, to recoup past losses on the policies and on its investment portfolio, and to make the policies more profitable by inducing policy terminations by those policyholders who could not afford the increase.” According to the suit, Transamerica is trying to “avoid its contractual obligation to meet the high interest crediting rates it promised.”
The suit points out that in its reports and answers to regulators, Transamerica never mentioned any “adverse changes in its current expectations regarding future costs of insurance,” and, further, that Transamerica’s investment returns are “nowhere near the returns needed to support continued interest credit to the Policies’ accumulation account at the guaranteed 5.5% effective rate.” The suit goes on to say that since non-guaranteed elements such as the COI “are required to reflect expectations of future [emphasis theirs] experience, Transamerica is precluded from redetermining those elements to recoup past losses. To do so would violate the actuarial standards of practice and code of professional ethics.”
The lawsuit alleges that Transamerica increased the costs to “force its insureds to surrender [cancel] their Policies” in order to “reduce the size of an unprofitable block of life insurance policies.”
The lawsuit is seeking a reversal of the COI increases as well as compensatory and punitive damages to be paid to the affected policyholders. In addition, the suit seeks the reinstatement of policies that were cancelled or surrendered.
This is now the fourth life insurance company to raise cost of insurance rates on inforce policies. I have written extensively on this topic and I am available to provide counsel about the best options going forward. If you are a Transamerica policyowner or if you are a C.P.A. or attorney with clients who needs help evaluating inforce permanent life insurance policies, please contact me at Life Insurance Concepts in Boca Raton, Florida. I can be reached at 561-988-8984.
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