Universal Life Insurance Policy Violation Lawsuits

Some insurance companies are under scrutiny for their universal life insurance policies and practices that may violate US regulations. These companies are alleged to have made substantial changes to their universal life insurance policies, increasing premiums by drastic amounts and making it difficult for policyholders to continue with the policy or find replacement policies. Lawsuits have been filed against some insurance companies alleging they have violated their contract with policyholders.

Universal life insurance policies last for the policyholder's life—or at least well into the policyholder's senior years. The policy includes both a death benefit and a savings benefit that accumulates through the life of the policy. Premiums may vary based on what the policyholder needs. With basic life insurance, the policy only pays out if the policyholder dies within a specific timeframe and the policy does not include a savings component.

Companies including Transamerica Life Insurance Company, Conseco, AXA Equitable Life Insurance Company, and Voya Financial all face criticisms they have unreasonably increased the rates for their universal life insurance policies. Critics allege the companies are doing so to subsidize the cost of meeting interest guarantees, recover past losses, and make policies more profitable by pushing out policyholders who could not afford the rate increase.

These increased rates could have a hugely detrimental impact on policyholders. Many people reportedly purchased universal life insurance policies decades ago, meaning they may not have the option of finding new life insurance policies. Those who cannot afford to pay the new rates may have more money deducted from the policy's cash value until the cash runs out and the policy lapses.

In February 2016, the Consumer Federation of America sent a letter to all state commissioners requesting an investigation into the increased costs of universal life insurance to ensure the increases are justified and to prohibit unjustified or unfair price increases.

A lawsuit has been filed by Consumer Watchdog against Transamerica Life Insurance Company, alleging the company violated its policyholder agreement by raising premium rates 38 percent in 2015. According to the insurance lawsuit, by increasing the amount it takes from policyholder accounts to cover premiums and other expenses, the insurance company avoids paying the interest rates the company agreed to when the policy was sold.

One of the named couples in the lawsuit—Gordon and Mary Feller—reportedly had their monthly deduction increase from $1,500 to more than $2,000 simply to maintain the same death benefit.

Consumer Watchdog alleges in its complaint that Transamerica sold universal life insurance policies and agreed to credit the interest with a guaranteed rate of no less than 5.5 percent annually but in 2015 suddenly increased deductions from policyholders' accounts by 38 percent. That increase, according to the lawsuit, was to recoup past losses and push out policyholders who could not afford the increase.

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Last updated on Sep-15-16