A class action lawsuit was filed yesterday in the United States District Court, Southern District of New York against AXA, alleging an ”unlawful and excessive cost of insurance (COI) increase.” The same law firm that recently filed suit against John Hancock (see: John Hancock Hit With Class Action Lawsuit Over Cost of Insurance In Some Universal Life Policies) filed the suit on behalf of a family foundation and “all others similarly situated.”
The suit points out that AXA marketed the Athena II policies as flexible premium products with marketing materials highlighting the policy owner’s ability to “choose the amount and frequency of your premium payment.” The suit alleges that AXA “unlawfully sought to punish policyholders for doing exactly that,” pointing out that according to public information, AXA was raising the rates for a specific block of policies and was “targeting owners who minimize their premium payments and keep policy values as low as possible—even though the policies expressly allow them to do so.” Though AXA may have the right to adjust the COI rates, the suit alleges that the increase in question was “unlawful” because the increase was based on policy funding, not mortality or investment experience.
According to the suit, AXA stated that it based the increase on two factors: less-favorable “future mortality and investment experience” over the past few years. The suit states that “neither of these statements is true and neither warrants the increase.” It points out that AXA, in a 2014 filing, answered no to a filing question asking whether “anticipated experience factors underlying any nonguaranteed elements [are] different from current experience” seven months before increasing costs on the Athena Universal Life II policies in question. The suit goes on to state that “mortality rates have improved steadily each year—i.e., mortality risks have only gotten better over time.” As for the less-favorable investment experience claim, the suit claims that investment experience cannot be used when considering a COI increase; only “investment income” can.
The suit alleges that since AXA singled out a small group of policies on insureds over age 70 at policy issue with a face amount of $1M, the increase is not “equitable to all policyholders of a given class” and states that “there is no equitable basis for singling out that subset for an increase,” as the policy contract states that any change in policy cost is required to be “on a basis that is equitable to all policyholders of a given class.” The change “cannot unfairly discriminate against certain policyholders within the same class.”
In addition, the suit maintains there is “no actuarially acceptable justification for increasing the COI rates on the selected group of policies” since the “policy does not permit AXA to use issue age or face value to determine who gets a COI increase.”
ITM TwentyFirst will be monitoring this new action and will report on further developments in future blog posts.
For a copy of the lawsuit, email firstname.lastname@example.org.