Policyholder Claims Lincoln Financial Group Unlawfully Raised COI Rates

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Lincoln National Corp. and Lincoln National Life Insurance Company (which do business as Lincoln Financial Group) have been named as defendants in a proposed class action that claims the companies unlawfully increased their cost of insurance (COI) rates. The plaintiff, a universal life insurance policyholder, alleges the defendants raised his monthly premium as much as 40 percent. According to the suit, the price increase was implemented “to coerce [the plaintiff] and other similarly situated policyholders into allowing their policies to lapse, thereby relieving Lincoln of its obligation to administer the policies in accordance with their terms.”

Lincoln purportedly attributed the change to “certain cost factors, including mortality, interest, expenses and the length of time policies stay in force.” The suit argues, however, that Lincoln is required to reevaluate the cost of insurance every month based on these factors, which would lead to gradual changes instead of the “dramatic rate hikes” at issue in the lawsuit. The plaintiff insists that Lincoln instead based the price changes on lower investment earnings, which he claims violates the policies’ terms and unlawfully harms policyholders.

In summary, the complaint argues the following: “By allowing unauthorized pricing considerations to enter into decision-making in setting COI rates, by drastically increasing COI rates to induce policy lapses, and make up for lost profits and/or investment losses, Lincoln materially breached the terms of the class policies by failing to determine the COI rate on a monthly basis and failing to base the COI rates on Lincoln's current expectation of future mortality, interest, expenses and lapses.”