A class-action lawsuit against Security Life of Denver, initially filed in July of 2018, is moving ahead in Colorado.  The lawsuit alleges policyholders have paid “unlawful and excessive” cost of insurance charges on Strategic Accumulator Universal Life and Life Design Guarantee Universal Life policies subject to increases announced in September of 2015.

The suit contends that there is “no possible justification” for the increase since mortality in the policies “steadily improved” from the time the policies were issued and “less than six months after the 2015 increase” the carrier’s own “Chief Actuary again certified that it expected mortality rates to continue to improve.”

The suit claims “the only possible explanation for Security Life’s conduct is that it is impermissibly using COI rates to manage and increase its own profitability” and that the increase “furthered Security Life’s goal of inducing policy lapses and relieving itself of potential death claims”  Using an increase in COI rates to generate higher profits and lapse rates “violates the terms of the Subject Policies,” according to the suit.

According to the document filed on behalf of the plaintiffs, in 2015, the year of the COI increase, Security Life paid to its parent company, Voya, an “aggregate dividend of $241 million.”  The dividend “marked a 750% increase over the single $32 million dividend that Security Life paid to Voya in 2014.”  The suit alleges “the only way that such a massive dividend could have been triggered is if Security Life was using COI adjustments to increase profitability.”  Security Life, in its rebuttal, admitted to the dividend payment but denied the rest of the allegations.

The carrier also agreed that “premium amounts may impact persistency,” but denied that they used the COI increase to generate a higher than normal lapse rate, as alleged.

The Initial scheduling conference is set for October 17th.

We will be following the lawsuit and will report back with updates.