This class action is a complicated one, involving income streams arranged for consumers by an insurance company and used to fund life insurance policies. Minnesota Life Insurance Company should have known that the plan was flawed from the beginning, the complaint claims, and should never have recommended it to their customers.
The class for this action is all individuals who bought FIP income streams as a mechanism for funding Minnesota life insurance policies who have not already received all of the payments they were entitled to under their FIP purchase agreement.
At issue in this case are Minnesota universal life insurance policies that, once fully funded, would provide a death benefit and also have an accumulated value that policyholders could borrow against to supplement their retirement income. According to the complaint, Minnesota advised customers to implement this with structured cash flows they could obtain through FIP, LLC.
How did these cash flows work? The policyholders paid a lump sum to FIP to buy a monthly income stream equal to the lump sum plus a rate of return. The rate of return depended on the length of the structured cash flow. For example, the complaint says, “a policyholder might pay FIP $100,000 to acquire a monthly income stream for a period of 3 years at a 5% rate of return. FIP paid higher returns for cash flows with longer terms.”
Payments from FIP would go to Minnesota to pay for the life insurance policy. Minnesota claimed that FIP’s rate of return allowed customers to pay for more expensive policies.
The difficulty was in FIP’s funding of the cash flows. FIP “bought” future income from pensioners, such as retired teachers and police officers. They offered the pensioners up-front, lump-sum payments in return for a portion of their monthly pensions for a certain length of time. However, the complaint claims that the total payback amounts to FIP “far exceeded” the amounts of the up-front, lump-sum payments.
FIP claimed these were “purchases” of future income, but regulators decided they were loans. The loans were unlawful because FIP was not licensed as a lender and did not carry out the procedures required when making loans. Because of this, FIP received cease-and-desist orders in various areas requiring it to stop its operations.
FIP not only stopped collecting the payments from pensioners but also stopped income-stream payments to Minnesota customers. This meant that the income-stream customers couldn’t recoup their lump-sum payments or pay for their insurance policies.
The complaint contends that Minnesota and its agents did not do due diligence on the FIP plans. It claims breach of contract and negligent misrepresentation, among other things.
Article Type: LawsuitTopic: Consumer
Most Recent Case Event
Minnesota Life Insurance Policy Payments from Income Streams Complaint
September 25, 2018
This class action is a complicated one, involving income streams arranged for consumers by an insurance company and used to fund life insurance policies. Minnesota Life Insurance Company should have known that the plan was flawed from the beginning, the complaint claims, and should never have recommended it to their customers.
minnesota_retirement_income_compl.pdfCase Event History
Minnesota Life Insurance Policy Payments from Income Streams Complaint
September 25, 2018
This class action is a complicated one, involving income streams arranged for consumers by an insurance company and used to fund life insurance policies. Minnesota Life Insurance Company should have known that the plan was flawed from the beginning, the complaint claims, and should never have recommended it to their customers.
minnesota_retirement_income_compl.pdf