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Blog2018-09-13T13:32:26+00:00

Transamerica Settles Cost of Insurance Increase Litigation

In 2015 we reported on a Transamerica cost of insurance (COI) increase on a block of universal life policies and illustrated the 40% increase in COI on one policy affected raised the annual carrying costs to maturity for that policy from $36,400 to $81,595.  That cost increase led to three separate class action lawsuits that were consolidated into one claim in November of 2016. Preliminary approval for the settlement of that consolidated case was filed in the United States District Court in California on October 4th.  Policyholders may opt out, but those who decide to participate will receive part of a $195 million fund set aside for owners of the 70,000 policies affected, including those who terminated their policies. The payout is considered a refund of past overcharges and provides cash credits to in-force policies to supplement cash values. Those with terminated policies will receive a cash payment. The cost of insurance increase imposed by the carrier will not be reduced going forward, but Transamerica agreed it would not impose any additional increase(s) “on any Class Policy within five (5) years of the Execution Date.” The carrier also agreed that any increase after the five year period would be “based [...]

Directed TOLI Trusts – the Good, the Bad and the Best Solution

Directed TOLI Trusts – the Good, the Bad and the Best Solution After over a decade in the TOLI (trust-owned life insurance) business, we are aware of trends that come and go. One trend we are seeing more and more lately is the use of directed TOLI trusts. Directed trusts divide the responsibilities of the trust into two distinct tasks – administration and asset management. Directed trusts are not new in the industry. Once, all trustees retained full authority over both the administration of the trust and the management of the trust asset, but as the trust and financial services world evolved, responsibilities blurred. Today it is not uncommon to have the trust administration performed by a trust company with the asset management overseen by an outside firm with no relationship to the trust company. The Good and the Bad In theory, directed trusts are the best of both worlds – each responsible party doing what they do best. In reality, that is not always the case. While some TOLI trustees simply do not have the requisite skills to manage the asset in the trust and outside help would be a blessing, we have found that often the person named [...]

California Issues Regulations Concerning Cost of Insurance Increases on Life Insurance

California Issues Regulations Concerning Cost of Insurance Increases on Life Insurance Almost exactly a year ago, we wrote about a new regulation implemented by the New York State Department of Financial Services to “govern life insurance company practices related to increases in the premiums” of life insurance and annuity policies. That regulation required carriers raising rates on policies to notify the department “at least 120 days prior to an adverse change in non-guaranteed elements of an in-force life insurance policy.” Carriers also had to notify consumers “at least 60 days prior to an adverse change in non-guaranteed elements of an in-force life insurance or annuity policy.” Last week, California Governor Jerry Brown signed into law Assembly Bill 2634, which aims to protect consumers affected by cost increases in their life insurance policies. Current California law requires a carrier to provide notice “upon an increase of premium if that policy provides for premium changes.” The new law, for all policies in effect after April 1, 2019, requires carriers to provide a “summary notice” to a policy owner of a “flexible premium policy” 90 days before any cost of insurance increases. This notice must include: The name and definition of “each nonguaranteed [...]

The Life Insurance Trust Company Process

In our last post, we highlighted the fact there finally is a solution for those TOLI trustees that share a common problem - orphan trusts - life insurance trusts with grantors who have no other business relationship with the bank or trust company. That solution is Life Insurance Trust Company (LITC), an affiliated company started under the ITM TwentyFirst umbrella.  Many TOLI trustees have reached out to us in the past year to describe the issues they have with orphan trusts, namely, they represent mostly liability and little revenue. Most TOLI trustees do not have the economy of scale needed to manage life insurance trusts profitably without additional revenue from the TOLI client and housing orphan trusts simply makes no business sense.  Even those trustees with TOLI clients with other revenue generating assets have contacted LITC to see if moving their ILITs makes sense and it can. LITC is a specialty asset company and can lift those ILITs out without tampering with the other more lucrative opportunities the bank or trust company has with that client. But how does LITC do that? The 5-step process is rather simple. NDA: As with most business transactions the first step starts with a [...]

Life Insurance Trust Company Completes Bulk Transfers of Life Insurance Trusts

Life Insurance Trust Company Completes Bulk Transfers of Life Insurance Trusts Establishes unique and proven process to transfer ILITS from Banks and Trust Companies Sioux Falls, South Dakota, September 18, 2018: Life Insurance Trust Company (LITCO), the only trust company focused exclusively on life insurance trusts, recently completed two court approved bulk transfers of life insurance trusts. The financial institutions involved moved portions of their Irrevocable Life Insurance Trust (ILIT) portfolios to LITCO as part of plans to scale back servicing as a fiduciary for ILITs. “We launched LITCO in late 2017 as a unique option for financial institutions seeking to exit the ILIT business, while providing an excellent alternative for their clients. Historically, exiting ILITs has been a cumbersome process for financial institutions, often involving one-off transactions. We developed an extremely efficient way for banks and trust companies to transfer ILITS in bulk to LITCO through a court approved process. We look forward to helping many more institutions looking to transition out of the ILIT business,” said Kurt Gearhart, CEO ITM21st, the parent company of LITCO. Life Insurance Trust Company was launched by ITM21st, a pioneer in the insurance trust market. LITCO is unique in that it will [...]

What A TOLI Trustee Can Learn from Existing Court Cases – Part 2

In our last post, we reviewed three court cases that guide TOLI trustees dealing with the liability that managing life insurance brings.  In this post, we will review three more cases that will add to that guidance. French, et al. v. Wachovia Bank N.A. The Wachovia case grew out of a policy replacement that generated a large commission for Wachovia’s insurance affiliate and centered on the beneficiaries claim that Wachovia was “self-dealing.” The grantor of an ILIT approached Wachovia after growing disillusioned with his existing trustee. The ILIT held two “underperforming” whole life policies. Wachovia insurance advisors developed a proposal to exchange the two existing policies for a John Hancock Guaranteed Universal Life policy providing “the same death benefit but at a much lower premium.” Documentation was created outlining the pros and cons of the transaction – the new policy would have no premium flexibility and little cash value; while the existing whole life policies had some premium flexibility and develop significant cash value. The grantor signed the policy application but balked when provided with a release waiver that  disclosed Wachovia would receive compensation for the transaction. Nevertheless, Wachovia moved ahead with the policy replacement without obtaining a signature on [...]

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This Sliding Bar can be switched on or off in theme options, and can take any widget you throw at it or even fill it with your custom HTML Code. Its perfect for grabbing the attention of your viewers. Choose between 1, 2, 3 or 4 columns, set the background color, widget divider color, activate transparency, a top border or fully disable it on desktop and mobile.

This Is A Custom Widget

This Sliding Bar can be switched on or off in theme options, and can take any widget you throw at it or even fill it with your custom HTML Code. Its perfect for grabbing the attention of your viewers. Choose between 1, 2, 3 or 4 columns, set the background color, widget divider color, activate transparency, a top border or fully disable it on desktop and mobile.