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.

This week, we received communication on another round of increases from the carrier. According to a representative of Lincoln, the COI increases will affect the following policies: Legend 3000, LifeSight 30, 31 and 32, UL 101, 102, 103, 130 and 131 and Vision 20.

In correspondence received from Lincoln regarding a Vision 20 policy we manage, it was noted the increases will begin on August 4th, 2017. The increases were made after Lincoln “updated projections” of their “future costs for providing this coverage,” and after undertaking an “in-depth actuarial analysis along with a rigorous review process.”
Per a FAQ sheet provided by the carrier, the rates are based on “future expectations” of “certain cost factors, including mortality, interest, expenses and the length of time policies stay in force.” Those “cost factors have changed; therefore, policy COI rates have been adjusted to appropriately reflect those future expectations.”

Lincoln has provided several options for policyholders including: continuing to pay the current premium, though “at some point premiums may need to be increased in order to keep the policy in force,” reducing the death benefit of the policy to lower the costs, replacing the current policy with another, or surrendering the policy for the cash surrender value.

Lincoln representatives could not tell us the size of the COI increase. They have provided a number of contact options and have suggested “the best way to learn how these COI changes will impact policy performance and to make an informed decision on managing your policy is to request an inforce illustration.”

We have requested inforce illustrations, and will be analyzing the information to determine the size of the increase and the effect on the carrying costs of policies. We will report back at a later date.