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Life Insurance Industry Lawsuit - Sudden Increase in Policy Charges Catches Policyholders Off-guard.

Transamerica Hit With Class Action Law Suit Over Cost of Insurance(COI) Increase

Life Insurance Company Sued for Raising Cost of Insurance Rates on Inforce Policies.

Transamerica sued for cost increases on existing permanent insurance policies.

Along with others, Transamerica has raised the cost of insurance for some current policy owners.  A monumental and controversial decision, most policy owners are unaware of the impact to their policy. If you own a policy from any of the 4 companies that raised rates, you will need to adjust. The older you are, the more serious the problem is in the near future.

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.”

The lawsuit alleges that Transamerica raised the Cost of Insurance charges (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..." According to the suit, Transamerica is trying to “avoid its contractual obligation to meet the high interest crediting rates it promised.”

This is now the fourth life insurance company in the past year to raise cost of insurance rates on inforce policies. I have written extensively on this topic over the past several years and I can help you understand the consequences and your the best options going forward. If you own permanent life insurance from any company or if you are a C.P.A. or attorney with clients who own permanent life insurance and need help evaluating this situation, please contact me at Life Insurance Concepts in Boca Raton, Florida. I can be reached at 561-988-8984. You can visit us at Life Insurance Concepts.

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.

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