Hawkeye State regulators have told an insurer that it cannot ask customers to pay extra premiums the company believes they owe on universal life policies.
Iowa Division of Insurance says it issued a cease-and-desist order to Conseco Life Insurance Company, a subsidiary of Conseco Inc., Carmel, Ind., after it received complaints from some residents who hold Conseco Life UL policies. Some agents who had sold the policies also complained, officials say.
Conseco asked 168 UL policyholders in Iowa to pay premium increases of 40% to 60%.
Conseco made the demand after it discovered that an administrative error had allowed the policies to continue even though premium payments were insufficient, officials say.
Conseco says the policies were underfunded because they were subject to additional mortality charges and expenses that Conseco had underestimated, officials say.
Division officials quote from a Conseco letter to agents who had sold the policies.
Conseco told the agents that the request for additional payments “represents the shortfall payment required to maintain the policies’ guaranteed values.”
The policies in question had been sold by Massachusetts General Life Insurance Company and Philadelphia Life Insurance Company, which Conseco acquired in 1996.
Conseco has sent 2 letters to the customers within the past month telling them that it would cancel their policies if they did not make the required payments by Jan. 4, 2009, officials say.
The amounts due range from $15,000 to $25,000, officials say.