Last week, our Cedar Falls, Iowa, office received notice of a class action lawsuit settlement. The settlement, stemmed from a suit filed in Alabama, Erkins v. USAA Life Insurance Co.

According to a complaint filed on October 20, 2015, (1) Moses Erkins purchased a “Level Term Life Policy” with premiums designed to remain fixed for the “Level Benefit Period.” The $250,000 policy had a 20-year level death benefit period with a $1,025 “current” premium. After the 20- year period (up on July 20, 2017), the $1,025 annual premium would purchase a decreasing amount of insurance. The $1,025 premium cost was guaranteed for the first 5 years only, after which premium costs could increase.

The policy contract listed both the current and guaranteed premium cost of coverage, but according to the complaint filed, the policies were sold by USAA with “Current Premiums set substantially less than the maximum guaranteed premium and, with the Defendant’s stated expectation that the Current Premiums were planned to remain the same for the full duration of the contracts. Otherwise, the Policies would be prohibitively expensive and could not be marketed as they were.”

According to information provided in the settlement, (2), USAA did not “increase premium rates on any of the policies … before the end of the Level Benefit Period, but a premium increase” was “planned to take effect after the Level Benefit Period.” The plaintiff argued that in order for USAA to increase the costs in the policy it could only do so based on “expectations of future changes in mortality experience, expense experience” or “investment performance change from those expectations used in the original pricing of the Policies.”

The court did not rule in favor of either USAA or the plaintiff, instead a settlement was reached. According to settlement information, USAA agreed to provide “Settlement Class Members who submit a valid and timely claim form either a two-year term certificate or a single payment of varying amounts,” depending on their category.

In addition, USAA agreed to “provide additional written notice to all In-Force Policy Owners to inform them that their premium will increase after the Level Benefit Expiration Date.” They also agreed that there would not be any “additional re-pricing of the Policies for five years after the Effective Date of the settlement.”

It is unfortunate that the court did not rule in this case to provide us with some guidance on the issue of cost increases in life insurance policies. USAA, founded to provide a wide array of services for military member and their families, has consistently garnered high ratings from many consumer groups over the years and given the relatively small amount that they had to pay out, it is understandable why they decided to settle.

  1. Moses Erlins v USAA Life Insurance Company, Circuit Court of Barbour County Alabama, 10/30/2015
  2. LevelTermPolicySettlment.com

 

By |2017-01-12T07:25:28+00:00January 12th, 2017|Categories: General Interest, Policy Management|8 Comments

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8 Comments

  1. Joseph Thomas Shepherd April 21, 2017 at 12:30 pm - Reply

    When will it be determined how much of the settlement payout will be received by each claimant?

    • r craft June 9, 2017 at 11:05 pm - Reply

      Well, what is the answer? Roger Craft, USAAPolicyHolder

      • Ruth Drake July 21, 2017 at 6:23 am

        Was an answer received for this inquiry?

  2. capnbobby July 21, 2017 at 10:41 am - Reply

    It appears that the settlement is a CERTIFICATE for 10% of the Face Amount of the Base Policy as of October 31, 2016. The certificate duration is Two (2) years effective July 1, 2017. The certificate will pay the 10% of Face Amount even if your Base Policy terminates by lapse, surrender or conversion to the permanent life insurance.

    • Ruth Drake July 31, 2017 at 8:36 am - Reply

      I received a $100 check and the letter stated to cash immediately or within 120 days from the date of issue. How do I know if this amount is accurate?

  3. mbrohawn August 1, 2017 at 12:06 pm - Reply

    For information about the settlement you can go to this website. http://www.leveltermpolicysettlement.com/mainpage/CommonlyAskedQuestions.aspx
    We will, unfortunately, not be able to provide to anyone except clients of ITM TwentyFirst. Sorry.

  4. Sharron arnold September 8, 2017 at 2:46 pm - Reply

    Same thing happened to us. We have paid in $48,000 and at my husband death got14,000. They really don’t take care of the military. Sad situation.

    • MHD June 21, 2018 at 4:37 pm - Reply

      What ?

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