In 2015 we reported on a Transamerica cost of insurance (COI) increase on a block of universal life policies and illustrated the 40% increase in COI on one policy affected raised the annual carrying costs to maturity for that policy from $36,400 to $81,595. That cost increase led to three separate class action lawsuits that were consolidated into one claim in November of 2016.
Preliminary approval for the settlement of that consolidated case was filed in the United States District Court in California on October 4th. Policyholders may opt out, but those who decide to participate will receive part of a $195 million fund set aside for owners of the 70,000 policies affected, including those who terminated their policies. The payout is considered a refund of past overcharges and provides cash credits to in-force policies to supplement cash values. Those with terminated policies will receive a cash payment.
The cost of insurance increase imposed by the carrier will not be reduced going forward, but Transamerica agreed it would not impose any additional increase(s) “on any Class Policy within five (5) years of the Execution Date.”
The carrier also agreed that any increase after the five year period would be “based only on the collective effect of the cost factors assumed when the Policies were originally priced and will not increase the expected future profitability of Policies within the same plan to a level higher than projected based on original policy pricing assumptions, which is intended to ensure that Transamerica does not recover past losses.”
The agreement also includes a clause assuring the carrier would not deny death benefits for policies “based on an alleged lack of insurable interest or misrepresentations made in connection with the original application process.”
Policyholders affected will receive correspondence and if they decide to participate in the settlement will be required to release all claims against the company relating to the rate increases.
The settlement covers only those policies affected by the COI increases that occurred in 2015 and 2016. A separate case is in progress dealing with the 2017 increase we wrote about in July of that year. We will provide updates on the additional litigation when further news is available.
can you post the name of the case that was filed in 2017 on the other policies. Did they cover they TransSurvivor Life 115 on the 2017 case? I read the settlement documents and read the verbiage
“Lawsuits do not involve additional MDR increases TransAmerica imposed on a different set of policies beginning in 2017. “
I have a client who was age 94 at the time Transamerica did this which required almost a double of his existing premium. The Policy was sold in a life settlement transaction and he passed away earlier this year. Any idea how his heirs can make a claim?
More Transamerica news: I just called Transamerica to initiate a $100,000 death claim for the office manager of a client’s accounting firm. The policy is six years old, so no problem, right? WRONG! Transamerica is quoting 90 business days processing time on a routine death claim!