Wilco Life Insurance Improper Cost of Insurance Increase Class Action

Insurance companies are limited in their ability to raise rates on their existing policies. In this class action, the complaint alleges that Wilco Life Insurance Company improperly imposed a rate increase on Form CLIC-3002 policies. The complaint alleges, “Wilco breached the implied and express terms of the policies and misleadingly stated that the increases were permitted due to Wilco’s past costs.

The class for this action is all current and former CLIC-3002 policyholders who were subjected to Wilco’s COI rate increase. Policyholders covered by the settlements in the Lifestyle, LifeTrend, and Valuelire Litigations and policyholders in Georgia are not included in the class.

The holder of a universal life insurance policy pays a variable premium. The premium is deposited into an accumulation account that is sometimes called the cash value of the policy. The insurer adds interest to the account each month and deducts the costs and certain expense charges. The primary cost is the cost of insurance (COI).

Insurance companies can’t raise the COI at will. According to the complaint, the ability to raise the COI “is limited by the policy itself, actuarial standards of practice, the insurer’s redetermination procedures, and applicable law.” Wilco can increase rates on the policies at issue in this case only prospectively based on the insured’s “age, sex, and premium class on the date of issue[.]” The complaint says that these factors are “inextricably linked to the mortality risk of the block of CLIC-3002 insureds.”

The complaint alleges that the COI increases imposed on plaintiff Sherri West’s policy were excessive and not determined by these factors: “Wilco increased COI rates by up to 42% to substantially increase profits and recover past losses and expenses, including to recoup hundreds of millions of dollars squandered through egregious self-dealing within Wilco’s former corporate family; to recover hundreds of millions of dollars paid to settle civil lawsuits and regulatory actions involving similar unlawful tactics alleged by Ms. West here; and to offset the effects of past interest rate spread compression (or the amount Wilco earned on its portfolio of investments compared to the amount it pays in guarantees to its policyholders).”

The complaint also alleges that Wilco is aware that such steep increases may cause “shock lapses” in policies, because policyholders can’t pay them and will instead relinquish the policies.

If rate increases are to be based on “future mortality expectations,” the complaint says, then the rate increase cannot be right, because “the mortality expectations underlying the initial COI rates … could have only substantially improved since Ms. West and other Class Members were issued their policies.” Because of increases in life expectancy, the complaint claims, “Wilco’s future mortality expectations called for decreasing COI rates, not raising them by a burdensome 42%.”

The complaint alleges breach of contract and of the implied covenant of good faith and fair dealing.

Article Type: Lawsuit
Topic: Insurance
Tags: Insurance, Life Insurance, Unfair or Improper Increase in Premiums