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.

Policy cost increases will take place on the next anniversary date after November 2017.

Some Accumulator products will not feel the effect of the increase until after December 31, 2020.  Those policies were part of the Phoenix lawsuit that was settled in 2015. In that case, Phoenix raised the cost of insurance on Accumulator policies issued between 2004 and 2008, with face amounts of $1,000,000 or more, and issue ages equal to or above 65 or 68, depending on the policy. The plaintiffs alleged that the increase, which took place in 2010 and 2011, “did not apply uniformly to a class of insureds, discriminated unfairly between insureds of the same class, and were improperly designed to recoup past losses” (1).

While Phoenix denied the charges, they did agree to establish a settlement fund of up to $42,500,000 as compensation for the affected policyholders. In addition, the carrier agreed to “not impose any additional COI rate increases” on the affected policies, “through and including December 31, 2020” (2).

While we do not know the COI percentage increase, we have been told by carrier representatives that it will be consistent across each individual policy type.

According to the carrier, illustrations will be available 11/6/2017 reflecting the future cost increase for all policies affected, even those that were part of the settlement.  We will be reviewing that information, and will publish our findings.

  1. Frequently Asked Questions, http://phoenixcoisettlement.com/
  2. Decision and Order Approving Class Action Settlement and Approving Motion for Attorney Fees, 9/9/15, http://phoenixcoisettlement.com/