Friday, January 20, 2017

Universal Life's Rocky Road: The Latest

As we've been saying for a long time, the first few Universal Life iterations contained the seeds of their own destruction. Flashing forward a bit, we more recently noted that carriers themselves seem to have a penchant for, shall we say, tweaking that downward decline:

"[P]erhaps inspired by the TA litigation, policyholders of other carriers are also suing their insurers, citing much the same legal reasoning."

The newest to enter the fray are those ostensibly On Your Side©:

"In his six-page ruling on Jan. 9 denying Nationwide's bid to dismiss, Senior U.S. District Judge Warren W. Eginton wrote the family's claims that Nationwide increased its fees to boost profits while disregarding factors included in the policy are plausible."

What's this mean in English?

Basically, that Nationwide (apparently) got greedy, and then got caught with their hands in the till by lying about various charges and fees. Interestingly, the principle invoked here is called "the implied covenant of good faith and fair dealing." Which, while quaint, seems to me to be the most important underpinning of any contract, perhaps especially life insurance. After all, what else is it but a promise to deliver full value at some unspecified future date, when the original buyer is obviously in no position to contest any abuse by the insurer.

It's not unheard of for older policies (especially underfunded ones) to begin to go "underwater" as regards the cash value. But the real problem here is that the policy owner (in this case, a trust) was unable to obtain accurate, timely information from nationwide that might have helped save the policies.

That's just not right.

So, the case will go forward, and we'll keep readers posted on its progress.
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