Lincoln National Consolidated COI Lawsuit Update – The Case Is Moving On

A little over a year ago we posted a blog about a Lincoln Financial cost of insurance (COI) increase on Legend Series Universal Life policies issued between 1999 and 2007 that originated at Jefferson Pilot (Lincoln Financial purchased Jefferson Pilot in 2006). Earlier this year we reported on a class action lawsuit filed in in the Eastern District of Pennsylvania against Lincoln.  Other lawsuits soon followed, and in May we reported that four suits were combined in the Pennsylvania court into a Consolidated Class Action Complaint.

After the consolidated complaint was filed, Lincoln filed a Motion to Dismiss on June 8th. The Plaintiffs’ response was filed on July 28th, and Lincoln’s reply on August 17th.  On August 22nd the court held oral arguments, and on September 11th Judge Gerald J. Pappert issued a Memorandum in which the court ruled on Lincoln’s Motion to Dismiss, which he denied in part and granted in part.  As you will see, he mostly denied Lincoln’s requests, and the case will move forward. 

Transamerica Cost Of Insurance (COI) Case Results In Win For Plaintiffs

Less than two weeks ago we reported on an interesting COI increase lawsuit. In that case, DCD Partners v Transamerica Life Insurance Company, a Los Angeles church pastor who enlisted an outside investor to finance life insurance policies providing burial funds for congregants had filed suit, along with the investor, against Transamerica for a 50% COI increase in policies issued to the group. In their lawsuit, the plaintiffs alleged among other things, breach of contract in violation of California law and breach of the covenant of good faith and fair dealing.

WSJ Article Highlights Interesting Cost of Insurance Case

An interesting cost of insurance (COI) increase lawsuit has been playing out over the span of two years in a Los Angeles courtroom.  The case was featured in a Wall Street Journal today as the case is set to go to trial next week.  (1)

Phoenix Announces New Cost of Insurance (COI) Increases

This week our New York City office received letters from Phoenix alerting us to cost of insurance (COI) increases on Accumulator (I, II, III, and IV) and Estate Legacy Universal Life policies.  Per the carrier, the cost increase was necessary because “certain anticipated experience factors are now less favorable than we anticipated when we established the cost of insurance rate schedule.”  According to the letters we received, there will be a flat “overall increase to cost of insurance rates, as well as progressive increases…beginning when an insured reaches age 71 through age 85.”  A Phoenix representative told us that for policies on insureds older than 85, the full increase will be implemented at once.

Another Insurance Executive Rings An Ominous Industry Bell Because Of Low Interest Rates

In the last few years we have written over 20 articles on the cost of insurance (COI) increases that have plagued the life insurance policies we manage.  The main reason for those increases?  Most would say the historic low interest rate environment that we are (still) in. In a post published just over a year ago, we listed some low rate winners and losers. When rates are historically low, the winners are the borrowers, the losers are the lenders…and who are bigger lenders than insurance companies?  They take in premium, invest it, and hopefully make enough to support future benefits. By regulation they must invest the vast majority of those premiums in fixed investments. It has been widely reported that the industry has been hurting, but this week in an article in the Financial Times, an industry executive took it a step further saying that because of “anemic” returns, the environment in the insurance industry is “unsustainable.”

WSJ Article on Recent Court Case Highlights a TOLI Trustee Problem

A recent Wall Street Journal (WSJ) article (1) highlighted a problem we reported back in 2013 in a blog post entitled, So…What Happens at Age 100. The WSJ article tells the story of a Florida resident turning 100 years old who has an irrevocable life insurance trust (ILIT) that holds $3.2 million in death benefit. Because of contract language in his universal life policies, the trust will not receive the death benefit at age 100 when the policy matures, but only the cash value in the policy – a much lower amount. While the article states this is a “standard feature of permanent life insurance,” the insured/grantor and trustee are suing the carrier, Transamerica.

Transamerica Raising Cost of Insurance (COI) On Certain Policies Issued In 1998 and 1999

We recently received confirmation from Transamerica that they are raising cost of insurance charges on their Ultra 115 and Survivorship 115 products issued in 1998 and 1999. Increases will take effect on the policy anniversary dates beginning August 1, 2017. Although illustrations are not yet available, we have learned that the increases are expected to be 58%. Updates will be posted as they become available.

Lincoln Financial Group Raising Cost of Insurance (COI) On Another Block of Policies

In May of 2016, we reported that Lincoln Financial Group, acting as administrator and reinsurer, had raised cost of insurance (COI) rates on a block of policies issued by Aetna Life Insurance and Annuity Company (now Voya Retirement Insurance and Annuity Company.) In August of the same year, we reported that they were raising COI on a block of Legend Series Universal Life policies issued between 1999 and 2007 originally issued by Jefferson Pilot (Lincoln Financial purchased Jefferson Pilot in 2006). This January, we reported that the first class action lawsuit had been filed dealing with that increase, and in May, we reported that four lawsuits, including the first one we reported on, had been consolidated in the United States District Court Eastern District of Pennsylvania.

Now Is the Time to Consider Outsourcing Your Irrevocable Life Insurance Trust Administration – Last in a Three Part Series

In the first two entries in this series we outlined the TOLI outsourcing model and examined the many advantages of outsourcing the administration of your TOLI trusts. In this entry, we will explore the vulnerability for most TOLI trustees – policy management. While the case to outsource can be made generally on economics alone, we have seen time and time again that trustees simply do not have the requisite skills or training to truly manage a life insurance portfolio in-house. We regularly see situations where the wrong decisions involving a policy create real liability for the trustee. There are three areas where we see this most consistently.

Now Is the Time to Consider Outsourcing Your Irrevocable Life Insurance Trust Administration – Second of a Three Part Series

In our last entry, the first of this three part series, we outlined the TOLI outsourcing model, starting with onboarding the trust and policy, through the full administration process and touching on remediation. In this entry, we will discuss the advantages of outsourcing for the TOLI trustee.