Conseco Life Insurance Blocked from Boosting Rates for Elderly Policyholders
Indiana-based life insurer, Conseco, was blocked from a plan to raise policy rates for more than 50,000 mostly elderly policyholders this week. A federal judge in Los Angeles ruled against the life insurance company that wanted to triple its rates for specific customers.
Judge Decides Increases Would Breach Contract
Conseco Insurance Co. proposed to increase its rates back in 2002 before it filed for Chapter 11 bankruptcy protection. The increases, which were to take place when its customers’ policies reached their 21st year, would have tripled some Valulife and Valuterm policies in 2010 and 2011.
With increases ready to take effect last year, a class-action suit was filed against the company, which was heard before a Los Angeles judge on Wednesday.
In the hearing, District Court Judge A. Howard Matz ruled the increase constituted a breach of contract. He also found that the company was trying to use the increase to duck a requirement by its primary regulator, the Indiana Department of Insurance.
According to court documents, Conseco was required to add approximately $100 million to its reserves but didn’t have the money to do so.
Conseco Disappointed with Ruling
A spokesman for Conseco’s parent company CNO Financial Group Inc., Tony Zehnder, expressed his disappointment with the ruling.
On the other hand, the Indiana Insurance Department spokesman, Logan Harrison, said that while his agency was monitoring the lawsuit, it has not yet reviewed Matz’s ruling and is unable to comment.
Surely, the block in increases is a sigh of relief for the policyholders who would have been affected. However, they are not yet in the clear as Conseco has announced its plans to appeal the ruling.