PHL Variable Life Unlawful COI Increases Class Action

This class action brings suit against PHL Variable Life Insurance Company (Phoenix), alleging it is imposing an excessive and unlawful cost of insurance (COI) increase. It concerns a subset of policies, Phoenix Accumulator Universal Life (PAUL) and Phoenix Estate Legacy (PEL) policies.

The class for this action is all owners of PAUL and PEL policies issued by Phoenix who were notified on or after November 2, 2020 that they would have a COI rate increase.

In 2010, Phoenix and a New York sister company, Phoenix Life Insurance Company (Phoenix NY) tried to impose a COI increase on the PAUL policies. According to the complaint, insurance regulators in New York, California, and Wisconsin determined that the increase was illegal.

Phoenix and Phoenix NY attempted another COI increase in 2011. A class action (Phoenix I) was filed against both increases. Phoenix and Phoenix NY settled, with the companies paying $130 million and agreeing not to raise COI rates again until December 31, 2020.

The companies were later sold to a private equity firm which decided to improve the companies’ profitability by telling customers in 2017 that they were to have another COI rate increase on certain PAUL and PEL policies, which included the class in the Phoenix I settlement. A class action lawsuit was filed about that increase and it is still going on.

Phoenix policyholders then received a letter announcing a fourth COI increase on PAUL and Phoenix Estate Legacy policies in 2021. The complaint alleges that this increase is unlawful: The policies in question, the complaint alleges, “require Phoenix to implement changes in COI rates on a uniform basis for policyholders in the same class; they prohibit Phoenix from recouping past losses; and they require that any change in COI rates be based on a new change in certain, limited enumerated factors. The 2021 COI increase violates all of these provisions.”

The complaint makes these allegations:

• That the COI increase was not based on a change in expectations but was meant to recoup losses.
• That Phoenix did not impose the increase equally but (1) gave certain customers a rebate for the increases while requiring others pay it, and (2) imposed the increases on elderly customers, rather than on the full policy class.
• That Phoenix imposed the increase to recoup losses, when expectations had been improving.

Furthermore, the complaint notes that the increase was being imposed when corporate tax rates had just declined, that is, when it claims COI rates should have decreased.

“Tellingly,” the complaint alleges, “Phoenix NY did not implement the new 2021 COI Increase even though it issued identical PAUL and PEL policies.” The complaint alleges that this is because New York regulators would not permit them.

The complaint alleges, “Phoenix’s conduct is particularly egregious because it is targeting elderly insureds who have few, if any, options for replacement insurance.” It claims the increases have been designed to induce elderly insureds, who are more likely to make claims, to let their policies lapse.

Article Type: Lawsuit
Topic: Insurance
Tags: Cost of Insurance, Insurance, Life Insurance