John Hancock, in a court filing posted last Friday in the Southern District of New York, agreed to pay just over $91 million to plaintiffs who participated in a lawsuit alleging the carrier had forced them to pay “unlawful and excessive” cost of insurance expenses in universal life policies. This particular suit was different than others that have been filed against carriers because this suit alleged John Hancock should have lowered rates in its policies since mortality rates “declined significantly over the past several decades” and expectations of future mortality experience “likewise substantially changed in its favor.” In the suit it was noted that John Hancock had “repeatedly stated in regulatory filings over the past 15 years that mortality experiences were substantially better than it expected.” Yet even though the mortality experience was much improved over expectations, “John Hancock has not lowered the COI rates it charges its customers,” even though the carrier “contractually promised” to review COI rates “at least once every 5 policy years.”
According to the original lawsuit there was a “mutual and reciprocal commitment” between the carrier and the members of the class action lawsuit – “policyholders agree to let John Hancock increase COI rates if expectations of future mortality experience get worse, and in return, John Hancock agrees to decrease COI rates on its customers when there is an improvement in mortality experience. John Hancock, however, has failed to live up to its end of the bargain.”
The Memorandum issued by the court pointed out the exhaustive nature of the case which started two and a half years ago. The plaintiffs’ attorneys and staff reviewed “over 340,000 pages of documents (including over 2000 spreadsheets)” and had experts spend “23 days onsite at John Hancock’s offices in Boston, Massachusetts extracting reams of data on tens of thousands of policies.”
The settlement provides the members of the class action lawsuit with a $91.25 million cash payment, with the money “distributed directly to Class members, with no need for claims forms and no funds reverting to John Hancock.”
This case, 37 Besen Parkway LLC v. John Hancock Life Insurance Company, is separate from the case we wrote about on June 11th of this year. In that case, John Hancock was being sued for actual cost of insurance increases on its Performance UL policies. We will have an update shortly on an analysis of those increases.