Judge Rules That Consolidated Lawsuit Against Transamerica for COI Increase Can Be Heard

On November 8th, a United States District Court judge in California’s Central District ruled that a consolidated class-action lawsuit against Transamerica could move forward. The lawsuit’s main allegation concerned Transamerica’s “breach of faith” for the cost of insurance (COI) increase in their Universal Life policies.
We reported back in September of 2015 that Transamerica increased costs in several of its Universal Life insurance policies (see: Transamerica Cost Increase Causes Premium to Maturity to More Than Double: A Case Study for Trustees). Earlier this year we discovered another Transamerica cost increase while working on a policy review, which we subsequently covered in Transamerica Cost of Insurance Increases: Is the Other Shoe Now Dropping? That increase was dramatically higher than the first one. Transamerica acknowledged this new increase shortly after we discovered it.
The Transamerica cost increase dramatically raised the carrying costs of life insurance policies and several class-action lawsuits were filed against the carrier. Three of those lawsuits were combined: one filed in California by Consumer Watchdog (see: Consumer Group Files Suit Against Transamerica for Cost of Insurance Increases); a second California lawsuit, Thompson v. Transamerica Life Insurance Company (see: Another Class Action Lawsuit Filed Against Transamerica for Cost Increases); and one originally filed in the Southern District of Florida (see: Preliminary Injunction Motion Filed in South Florida Against Transamerica to Stop Cost of Insurance Increases). In a June 10, 2016, Consolidated Class Action Complaint filed in the Central District of California, the plaintiffs asserted “seven claims against Transamerica on behalf of themselves and all others similarly situated”. On August 1, 2016, Transamerica filed a motion to dismiss the complaint.
In the complaint filed, the plaintiffs argued that Transamerica was not allowed to set monthly deductions (which included the COI) “in whatever amount or by whatever method it determines.” The plaintiffs also argued that the standardized policy language requires that Transamerica can only change deductions based on underlying mortality rates and that Transamerica was not allowed to “set or increase [monthly deduction rates] to recoup past losses” because of low interest rates or other factors. They further argued that the deduction increase of “as much as 100%” caused “an astronomical increase in the premiums necessary to maintain coverage under the policies” which was designed to induce “shock lapses.”
On October 31, 2016, the court heard oral arguments. On November 8th, the Honorable Cristina A. Snyder ruled against Transamerica; their motion to dismiss the plaintiffs’ claims was denied.
For a copy of the Civil Minutes in the case, please email mbrohawn@itm21st.com.

10 thoughts on “Judge Rules That Consolidated Lawsuit Against Transamerica for COI Increase Can Be Heard

  1. Michael, what about the other carriers doing the same COI increases? Give me your best estimate of where this will end. All the best my friend.
    Glen Blauch

  2. Hi Glen: I really do not know where this will lead. I have heard at least one more lawsuit might be coming and I believe for this Transamerica case they will be working for an injunction against the COI increase, as we talked about in a prior blog. But I have not heard anything else on lawsuits against other carriers. Do take care.

  3. Is there any group of Transamerica policy owners discussing how they are dealing with renewal premium invoices? My clients face a 600% increase in February, 2017. They would like to know what others in their position are doing.

    John Sullivan

    • Our policy face amount is $275,000. Premium paid for 17 years to date $170,000. Projected premiums for 5 more years is $150,000. So let’s see, pay $320,000 in premiums for a $275,000 death benefit. If this isn’t the most shameful example of “bait and switch”. You pay premiums for 17 years and when almost at the goal line they move the goal post.

      • Hi Scott Gardiner. I have a client with a similar situation. She is a 84 year old widow with a $25k policy. She has paid $29k and is about lose her policy because she can no longer afford it. The COI in 2009 for the policy was, $620.65. The COI in 2016, $1,631.61, a more than 260% increase. The client has paid into the policy since 1986 and was never late with a payment. Today, February 21, 2017, the cash value of the policy is, $261. Imagine, an 84 year old widow being taken advantage of in this way. Scott, if you are able to find an amiable resolution, please post here. Thank you.

  4. Transamerica have cheated me,I have paid on this policy since 1987,theuy are crooks,I want every cent I paid with interest.

  5. Hello we live in SC our Transamerica policy is located in Florida according to the local agency. After speaking to him this morning I realize we too are victims how would we go about joining this lawsuit?

    Sincerely Elizabeth and Morris Connell

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