Transamerica Life Insurance Co. has agreed to settle a class-action lawsuit filed in Los Angeles, alleging that the company improperly increased the monthly charges of holders of universal life policies, the plaintiffs’ attorneys announced Tuesday.
Under the proposed settlement, filed in U.S. District Court, Transamerica has agreed to pay up to $88 million in account value credits to policies in effect and those for which death claims were pending as of last Dec. 31, according to attorney Andrew S. Friedman.
U.S. District Judge Christina Snyder scheduled a May 4 settlement approval hearing.
“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,” Friedman said. “Our number one goal was to get as much money as we could back to these policyholders as quickly as possible. We have accomplished our goal.”
A Transamerica representative could not immediately be reached for comment.
Universal life insurance policies allow policyholders to change the amount and frequency of premium payments as long as their policy contains enough cash to cover monthly deductions. Whole life insurance policies, on the other hand, require fixed monthly payments.
The plaintiffs argued that Transamerica impermissibly increased the rates in 2017 to recoup losses.
The pending settlement’s account value credits are sufficient to refund 100% of the alleged past overcharges resulting from the challenged increases, according to Consumer Watchdog, which represented plaintiffs.
Class members with policies affected by the increases that terminated before Dec. 31 would receive cash payments refunding the past alleged overcharges withdrawn by Transamerica before the policies terminated. The account value increases and payments would be based on the proportion of the total challenged charges paid by each policyholder, plaintiffs’ lawyers said.
The June 2018 lawsuit stemmed from allegations that the company withdrew from the accounts of policy holders who own TransUltra or TransSurvivor universal life policies. Transamerica increased the monthly deduction charges on those policies in October 2017 and June 2018, respectively, according to the plaintiffs.
It’s the second such lawsuit and settlement arising out of so-called “cost of insurance” increases by Transamerica, according to Consumer Watchdog.
If Snyder signs off on the settlement, Transamerica would deposit the payments to existing policyholders’ current insurance accounts; owners of terminated policies will receive payment automatically by check. No claim forms would be required, plaintiffs’ attorneys said.
Transamerica has also agreed not to impose any additional increases in the monthly deduction rate schedules applicable to the class members’ policies for a period of seven years, unless the company is ordered to do so by state regulatory authorities, the plaintiffs’ attorneys said.
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