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.

The policyholders involved have received annual statements showing that the funding requirement for the policies had been met, officials say.

Officials note in their order that Conseco representatives have also told them that another error had caused it to underpay interest due to some holders of one of its annuities. The company said it would pay the appropriate interest to those policyholders, officials say.

Conseco says it told policyholders that an administrative problem had allowed them to pay lower premiums or skip premiums altogether over a period of years, because they did not receive notice that additional payments were due. “We regret our error,” the company said.

Under terms of the contracts, paying the premiums due would bring the accounts current, or the policyholders could make other changes in their policies to lower their premiums, Conseco said.

“None of the additional premiums that policyholders choose to pay will go to the company,” Conseco Insurance Group President Steven Stecher says in a statement. “All premiums will go to the policyholders’ accounts in order to maintain their insurance protection.”

No policyholder received reduced benefits because of the error, Stecher said.

“In the past 12 months, we’ve processed nearly 400,000 claims for Iowa policyholders, paying out approximately $61.5 million in policy claims and benefits,” Stecher said.

Iowa Insurance Commissioner Susan Voss says in her own statement that Conseco should not attempt to lay the consequences of an error on policyholders.

“We tried to work with the company to get them to cooperate in withdrawing their demands,” but the company refused to do so, Voss says.

Voss says Conseco Life has a right to a hearing within 30 days of the issuance of the order. Voss issued the order Tuesday.