By Timothy Darragh, BEST WIRE

April 8, 2020

Transamerica Life Insurance Co. has agreed to settle a class-action lawsuit filed by policyholders who alleged it improperly increased monthly charges on their universal life insurance policies.

According to the settlement agreement in U.S. District Court in Los Angeles, Transamerica will pay up to $88 million in account value credits to policies in effect and those for which death claims were pending as of Dec. 31, 2019.

It is the second such settlement Transamerica has agreed to in recent years. In 2018, the company agreed to a $195 million settlement to resolve a class-action lawsuit that alleged it increased the monthly deduction rate for roughly 70,000 universal life insurance policyholders (Best’s News Service, Oct. 5, 2018).

Transamerica admits no wrongdoing or fault, according to the terms of the latest settlement proposal.

The account value credits in the proposed settlement are sufficient to refund all of the alleged past overcharges, according to a statement from Consumer Watchdog. Class members with policies affected by the increases that terminated before Dec. 31 will receive cash payments refunding the alleged overcharges, it said.

The account value increases and payments will be based on the proportion of the total challenged charges paid by each policyholder, it said.

Transamerica will deposit the settlement payments to existing policyholders’ current insurance accounts; owners of terminated policies will receive payment by check, it said.

In addition, Transamerica also has agreed not to impose any additional increases in the monthly deduction rate schedules applicable to the class members’ policies for seven years, unless ordered to do so by state regulators, the statement said.

“The increased charges that Transamerica applied to these universal life insurance policies caused tremendous surprise and stress for the affected policyholders, many of whom are now senior citizens, and some of whom are quite elderly and on fixed incomes,” said Andrew S. Friedman, co-lead counsel for the plaintiffs. “Our No. 1 goal was to get as much money as we could back to these policyholders as quickly as possible. We have accomplished our goal.”

In a statement, Transamerica said it made periodic rate adjustments according to the terms of its policies, but decided it was in the best interest of both Transamerica and its policy owners to resolve the litigation on mutually agreeable terms.

“The policies at issue in the Thompson v. Transamerica Life Insurance Co. litigation provide policy owners with guaranteed maximum monthly deduction rates and provide Transamerica broad discretion to charge rates below the guaranteed maximums,” a company spokesperson said in a statement. “In setting the rates challenged through the litigation, Transamerica complied with its contractual obligations to set rates below the guaranteed maximums and to charge rates based on its expectations of future cost factors, such as mortality, expenses, interest, taxes and persistency. At no time did Transamerica charge any of its policy owners more than the contractually guaranteed maximum rates.

“We understand that insurance coverage is valuable to our customers. Transamerica is in full compliance with its contractual obligations, and is committed to helping these customers continue to meet their insurance needs.”

Transamerica has a current Best’s Financial Strength Rating of A (Excellent).

(By Timothy Darragh, associate editor, BestWeek: [email protected])

Transamerica Life Insurance Co. has agreed to settle a class-action lawsuit filed by policyholders who alleged it improperly increased monthly charges on their universal life insurance policies.

According to the settlement agreement in U.S. District Court in Los Angeles, Transamerica will pay up to $88 million in account value credits to policies in effect and those for which death claims were pending as of Dec. 31, 2019.

It is the second such settlement Transamerica has agreed to in recent years. In 2018, the company agreed to a $195 million settlement to resolve a class-action lawsuit that alleged it increased the monthly deduction rate for roughly 70,000 universal life insurance policyholders (Best’s News Service, Oct. 5, 2018).

Transamerica admits no wrongdoing or fault, according to the terms of the latest settlement proposal.

The account value credits in the proposed settlement are sufficient to refund all of the alleged past overcharges, according to a statement from Consumer Watchdog. Class members with policies affected by the increases that terminated before Dec. 31 will receive cash payments refunding the alleged overcharges, it said.

The account value increases and payments will be based on the proportion of the total challenged charges paid by each policyholder, it said.

Transamerica will deposit the settlement payments to existing policyholders’ current insurance accounts; owners of terminated policies will receive payment by check, it said.

In addition, Transamerica also has agreed not to impose any additional increases in the monthly deduction rate schedules applicable to the class members’ policies for seven years, unless ordered to do so by state regulators, the statement said.

“The increased charges that Transamerica applied to these universal life insurance policies caused tremendous surprise and stress for the affected policyholders, many of whom are now senior citizens, and some of whom are quite elderly and on fixed incomes,” said Andrew S. Friedman, co-lead counsel for the plaintiffs. “Our No. 1 goal was to get as much money as we could back to these policyholders as quickly as possible. We have accomplished our goal.”

In a statement, Transamerica said it made periodic rate adjustments according to the terms of its policies, but decided it was in the best interest of both Transamerica and its policy owners to resolve the litigation on mutually agreeable terms.

“The policies at issue in the Thompson v. Transamerica Life Insurance Co. litigation provide policy owners with guaranteed maximum monthly deduction rates and provide Transamerica broad discretion to charge rates below the guaranteed maximums,” a company spokesperson said in a statement. “In setting the rates challenged through the litigation, Transamerica complied with its contractual obligations to set rates below the guaranteed maximums and to charge rates based on its expectations of future cost factors, such as mortality, expenses, interest, taxes and persistency. At no time did Transamerica charge any of its policy owners more than the contractually guaranteed maximum rates.

“We understand that insurance coverage is valuable to our customers. Transamerica is in full compliance with its contractual obligations, and is committed to helping these customers continue to meet their insurance needs.”

Transamerica has a current Best’s Financial Strength Rating of A (Excellent).

(By Timothy Darragh, associate editor, BestWeek: [email protected])