A proposed class action filed in New York claims New York Life Insurance and Annuity Corporation unlawfully hiked up the premiums for its universal life insurance policies in violation of state law. The plaintiffs in the case, a father and daughter, argue that even though they have faithfully paid monthly premiums for 13 years, the insurance company’s conduct has caused a lapse in their coverage that’s rendered their policy “worthless.”
According to the lawsuit, NY Life’s universal life insurance policies include both a death benefit and an accumulated cash value that accrues from what’s left of premium payments after the insurance company deducts the “cost of insurance” each month.
The father plaintiff claims he purchased the defendant’s universal life insurance policy in 2004 to provide security for his daughter’s family, and was told that “while the Policy’s premiums might increase by a small amount over time, depending on interest rates, the increase would not be significant.” The man says he paid approximately $23,000 per year until 2018, when NY Life allegedly informed him that his annual premium would be raised to $45,722.49.
“NY Life provided no warning or explanation for why the premium had suddenly nearly doubled,” the complaint states, adding that the cost of the policy is set to increase again to $92,801 in its 16th year, which would amount to a 297-percent increase over a two-year period. The lawsuit argues that the rate increases are unlawful because they exceed the maximum rates contained in policy forms the defendant submitted to state insurance agencies.
Moreover, the plaintiffs allege that when they requested a copy of their policy, the defendant provided them with a document “in place of a previously issued policy with the same policy number.” The suit claims the provided copy was not the same form that had been approved by the state of Connecticut, where the father plaintiff resides, and “is less valuable and provides worse protection” than the original document.
Among the changes, the case says, was the omission of non-forfeiture provisions that are required by the state and meant to protect insureds from lapses in coverage caused by egregious price increases. The plaintiffs experienced such a lapse in January 2019, the suit alleges, as the defendant’s “illegal and unfair rate hikes” were apparently more than they could afford.
“Due to the unfair and unaffordable premium increases unilaterally imposed by NY Life, the Policy lapsed on January 19, 2019,” the complaint reads. “After faithfully paying premiums for over a decade, Plaintiffs now have no cash value or life insurance remaining. NY Life has retained all of the benefits that were poured into the policy for the last fifteen years, and Plaintiffs are left with nothing.”