Mass Mutual Class Action Settlement Means Small Payout for Participating Policyholders

Posted on by mbrohawn

A class action lawsuit brought against Mass Mutual Life Insurance Company has resulted in preliminary approval of a $37.5 million payout. The payout benefits policyholders of Mass Mutual participating policies held between January 1st, 2001 and December 31st, 2016. A participating policy is one that receives dividends. ITM TwentyFirst has begun to receive notices of the payout that was agreed to in a document filed March 13th of this year in United States District Court District of Massachusetts.  ITM TwentyFirst manages or reviews almost 1,000 policies from the carrier, the majority being whole life participating policies.

Lawsuits Consolidated Against Lincoln National For Cost of Insurance Increase

Posted on by mbrohawn

In August of 2016 we wrote about a cost of insurance (COI) increase from Lincoln National (now Lincoln Financial Group) on a block of policies originally underwritten and issued by Jefferson Pilot from 1999 to 2007.  Lincoln Financial purchased Jefferson Pilot for roughly $7.5 billion in cash and stock in a transaction that closed in 2006.

Genworth Joins the List of Carriers Restricting In Force Ledgers

Since the beginning of the year, we have written about two carriers restricting their in force ledgers.  John Hancock recently noted a “temporary” situation on its Performance UL policies issued in certain states from 2003 to 2010, and alerted us that current assumption illustrations were unavailable for those policies.  Current assumption illustrations are those based on the current interest being credited and the current cost of insurance (COI) being charged on a policy.  In March of this year, Transamerica alerted us that they would “only run illustrations based on the guaranteed maximum charges and the guaranteed minimum interest rate” on a block of in force policies.  We noted that this was the second time that Transamerica placed restrictions on a block of policies.  The prior restriction was a precursor to a cost of insurance increase. 

Principle Based Reserving May Affect New Life Insurance Policy Pricing Going Forward

A new methodology for calculating policy reserves for life insurance policies has taken effect. The new methodology grew out of the 2009 National Association of Insurance Commissioners (NAIC) revisions to the Model Standard Valuation Law. Dubbed Principle-Based Reserving (PBR), the law was to take effect on the first day of the next calendar year if 42 states enacted the revisions by July 1st. The threshold was passed in 2016 and as of today, 46 states have adopted the revised laws.

The Prince Estate Sells His Music Vault, How Will That Affect His Legacy?

In 2004, Prince took part in a ceremony honoring George Harrison at the Rock and Roll Hall of Fame.  Sharing the stage with such rock luminaries as Steve Winwood, Tom Petty, and Jeff Lynne, Prince joined the group in a rendition of “While My Guitar Gently Weeps” by providing firepower on the song’s guitar solo, and he did not disappoint.  About halfway through the six minute and fifteen second YouTube video, Dhani Harrison, George’s son, smiles at Prince, knowing what is to come. Prince then launches into a three-minute performance in which he doesn’t just play notes, but makes the guitar an extension of his body.  Great guitarists make it look easy – it just flows, and that night it did for Prince.  By the time the last note rang out, with Prince tossing his vintage Fender Telecaster into the audience, the members understood what a singular talent he was.

Two More Lawsuits Filed Against AXA For Cost of Insurance Increases

Two lawsuits were filed one day apart last week against AXA Equitable Life Insurance Company for cost of insurance (COI) increases in its AXA Equitable Flexible Premium Universal Life Athena II policies. We “looked under the hood” of the AXA policies affected by these cost increases back in November of 2015. The increases were limited to those policies originally issued to people age 70 and above with a policy face value amount of $1 million or more, which factored into the substance of both lawsuits. There are now at least three lawsuits filed against AXA, including one we wrote about back in February of last year.

Ratings Agency Downgrades Outlook For Life Insurance Sector, But Others See Positive Opportunities For The Future

A report just out from Moody’s on the global life insurance market has downgraded the sector for 2017 from Stable to Negative. (1) The historically low interest rate environment is cited as a main reason. Moody’s acknowledges the “post-U.S. election bump in yields” we have seen after Donald Trump’s victory, but still believes the low rates will continue “to depress the sector’s investment returns and profitability.” While interest rates may be pushing slightly higher, rates credited to policies take a longer time to turn around, a fact we acknowledged over two years ago (see: Turning the Battleship Around…An Update.) For Moody’s, the low rates are “the main driver for the outlook change to negative.”

Dividends at The BIG 4 Carriers Mostly Down, But Are Interest Rates Finally Going Up?

A couple of weeks ago, we reported that Northwestern Mutual had declared its 2017 dividend and had not only lowered it but also increased some costs (see: Northwestern Mutual Dividend and Crediting Rates Drop, Expenses Rise). Northwestern Mutual was the first of the so-called “Big 4” mutual carriers to report. These A++ (AM Best)–rated companies are considered to be the gold standard among life insurance carriers. The others in the group (New York Life, Massachusetts Mutual, and Guardian Life) have now all reported in, and all but New York Life experienced a drop in their dividend interest rate (DIR).

New York State Floats Regulation To Require Life Insurance Carriers To Justify Cost Increases

Yesterday, the New York State Department of Financial Services proposed a new regulation designed to “protect New Yorkers from unjustified life insurance premium increases.”

Judge Rules That Consolidated Lawsuit Against Transamerica for COI Increase Can Be Heard

On November 8th, a United States District Court judge in California’s Central District ruled that a consolidated class-action lawsuit against Transamerica could move forward. The lawsuit’s main allegation concerned Transamerica’s “breach of faith” for the cost of insurance (COI) increase in their Universal Life policies.
We reported back in September of 2015 that Transamerica increased costs in several of its Universal Life insurance policies (see: Transamerica Cost Increase Causes Premium to Maturity to More Than Double: A Case Study for Trustees). Earlier this year we discovered another Transamerica cost increase while working on a policy review, which we subsequently covered in Transamerica Cost of Insurance Increases: Is the Other Shoe Now Dropping? That increase was dramatically higher than the first one. Transamerica acknowledged this new increase shortly after we discovered it.
The Transamerica cost increase dramatically raised the carrying costs of life insurance policies and several class-action lawsuits were filed against the carrier. Three of those lawsuits were combined: one filed in California by Consumer Watchdog (see: Consumer Group Files Suit Against Transamerica for Cost of Insurance Increases); a second California lawsuit, Thompson v. Transamerica Life Insurance Company (see: Another Class Action Lawsuit Filed Against Transamerica for Cost Increases); and one originally filed in the Southern District of Florida (see: Preliminary Injunction Motion Filed in South Florida Against Transamerica to Stop Cost of Insurance Increases). In a June 10, 2016, Consolidated Class Action Complaint filed in the Central District of California, the plaintiffs asserted “seven claims against Transamerica on behalf of themselves and all others similarly situated”. On August 1, 2016, Transamerica filed a motion to dismiss the complaint.
In the complaint filed, the plaintiffs argued that Transamerica was not allowed to set monthly deductions (which included the COI) “in whatever amount or by whatever method it determines.” The plaintiffs also argued that the standardized policy language requires that Transamerica can only change deductions based on underlying mortality rates and that Transamerica was not allowed to “set or increase [monthly deduction rates] to recoup past losses” because of low interest rates or other factors. They further argued that the deduction increase of “as much as 100%” caused “an astronomical increase in the premiums necessary to maintain coverage under the policies” which was designed to induce “shock lapses.”
On October 31, 2016, the court heard oral arguments. On November 8th, the Honorable Cristina A. Snyder ruled against Transamerica; their motion to dismiss the plaintiffs' claims was denied.
For a copy of the Civil Minutes in the case, please email mbrohawn@itm21st.com.