At issue in this case are the interest rates paid on California universal life insurance policies from American General Life Insurance Company (AmGen). The complaint alleges that the insurance earned by these accounts are too low and that the rates are not based, as the policies promise, solely on the company’s expectations of future investment earnings.
The Investment Earnings Only California Class is all current and former owners of life insurance policies from AmGen, or its predecessors, in California, with policy forms that say that redetermination of interest rates will be based “only on expectations of future investment earnings.”
Universal life insurance policies have two components, an insurance component and a savings component. The savings component is the account value or accumulation value. This amount earns interest at a “current interest rate” or a “credited rate.” The interest is added to the amount in the account, the complaint says, “are then used to pay for the insurance component through cost of insurance (COI) and other charges. The policy holder can also borrow cash from the account.
The interest rates are not fixed, although the AmGen policies at issue do specify a minimum interest rate.
The complaint quotes from the AmGen policies to say that, unlike COI rates and other charges, “[a]ny redetermination of interest rates will be based only on expectations of future investment earnings.” However, the complaint alleges that AmGen does in fact base its interest rates on other factors.
The plaintiff in this case, LSMIC, LLC, has an AmGen universal life policy. For at least four years now, the complaint alleges, AmGen has figured the credited interest on the policy at the guaranteed minimum rate, which is 3.0%. This is “despite changes in AmGen’s expectations of future investment earnings amidst dramatic fluctuations in the Treasuries, bonds, equities, and other assets in which AmGen invests policy holder account value.”
The complaint further alleges that this is “part of a deliberate strategy to turn credited rates into a profit center” for the company and to increase the returns for shareholders while lessening earnings for account holders.
The complaint alleges that long-term investors like life insurance companies can pursue strategies that are not possible with short-term investments. The complaint claims, “Insurers of AmGen’s size have, for the past several years, typically projected and earned returns between 5 and 6.5%.”
Nevertheless, AmGen’s parent company, AIG, “brags that it is crediting the guaranteed minimum on 63% of its universal life policies.”
The complaint alleges breach of contract and unfair competition.
Article Type: LawsuitTopic: Insurance
Most Recent Case Event
AmGen Criteria for Determining Policy Interest Rates California Complaint
December 21, 2020
At issue in this case are the interest rates paid on California universal life insurance policies from American General Life Insurance Company (AmGen). The complaint alleges that the insurance earned by these accounts are too low and that the rates are not based, as the policies promise, solely on the company’s expectations of future investment earnings.
AmGen Criteria for Determining Policy Interest Rates California ComplaintCase Event History
AmGen Criteria for Determining Policy Interest Rates California Complaint
December 21, 2020
At issue in this case are the interest rates paid on California universal life insurance policies from American General Life Insurance Company (AmGen). The complaint alleges that the insurance earned by these accounts are too low and that the rates are not based, as the policies promise, solely on the company’s expectations of future investment earnings.
AmGen Criteria for Determining Policy Interest Rates California Complaint