Transamerica Agrees to Discounted Policies
Transamerica Corp. on Friday said it will offer discounted policies to customers involved in a class-action lawsuit over universal life insurance policies bought from its Los Angeles-based subsidiary, Transamerica Occidental Life Insurance Co.
The company will take a $20-million after-tax charge to cover the costs of the settlement.
The customers, who filed the lawsuit in 1995, claimed that the insurer failed to fully inform them of the risks and costs involved when they signed up for universal life coverage, one of the most popular forms of life insurance pioneered by Transamerica Occidental in the early 1980s.
San Francisco-based Transamerica has denied the allegations but has agreed to help approximately 800,000 policyholders by offering them either discounted insurance or other types of financial products--such as annuities--to avoid costly legal proceedings. Transamerica estimates that the discounts will be worth about $135 million.
Customers also can file complaints with a policyholder representative appointed by the plaintiffs’ attorney to settle individual disputes.
“For those policy owners whose expectations weren’t fulfilled, we will partner with them to help meet their original insurance objectives by providing various types of benefits and customer service enhancements,” said Thomas J. Cusack, Transamerica Occidental Life Insurance Co.’s president and chief executive, in a statement.
Attorneys representing the policyholders were not available for comment on Friday.
Universal life insurance customers were able to offset the cost of their premiums in part by the market-rate interest income generated by their policies. But as interest rates plummeted from the record highs seen during the 1980s, policyholders have been forced to offset the decline in interest income in order to make premium payments.
Transamerica said the costs of the proposed settlement would be reflected in its first-quarter results. The giant insurance and financial services firm says it expects to report additional costs related to the dispute “over a period of years,” but expects those future costs to be minimal.
Not included in the settlement is a current effort by the company to supply policyholders with more information that better explains how universal life insurance works. It also will train customer service and salespeople on how to access and provide customers with more timely information on the financial performance and costs of their policies, according to James M. Jackson, deputy general counsel for Transamerica Occidental Life Insurance Co.
The proposed settlement is scheduled to be reviewed by a Superior Court judge in San Diego on June 26.
Policyholders may call (800) 774-3239 for more information.
