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Life Health > Life Insurance

States Settle With Insurer

By Allison Bell

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A group of 37 states and other jurisdictions negotiated a multi-state settlement agreement involving interest-sensitive whole-life policies.

Insurance regulators from California, Florida, Indiana, Iowa and Texas led efforts to come to terms with Conseco Life Insurance Company, a unit of CNO Financial Group Inc., Carmel, Ind. (NYSE:CNO).

The settlement affects consumers who bought Lifetrend whole-life policies from Conseco Life from 1978 to 1997.

Some marketing materials prepared for agent-use only used terms such as “vanishing premiums” and “paid-up policies,” according to a copy of the regulatory settlement agreement posted by the California Department of Insurance.

The Conseco Life administrative system did not account accurately for the performance of the policies, and it failed to generate premium notices for some policyholders who ended up with obligations to pay premiums, according to the agreement.

In October 2008, Conseco Life told policyholders that they would have to make flexible premium payments to keep the policies in force.

Regulators received complaints from policyholders and looked into the possibility that there were problems with Conseco Life marketing or administrative practices.

“Conseco Life does not admit or concede any actual or potential fault, wrongdoing or liability in connection with any facts or claims that have been or could have been alleged it,” according to the settlement agreement.

But Conseco Life has agreed to resolve the multi-state examination by developing a plan for detecting administrative system problems and to help Lifetrend policyholders who may have been affected by the marketing issues and administrative issues involved in the examination.

Conseco Life also will contribute $10 million to a settlement pool for the benefit of eligible Lifetrend policyholders, according to the settlement agreement.

About 12,247 Lifetrend policies are still in force, according to the Florida Office of Insurance Regulation.

In addition to contributing to the settlement fund, Conseco will pay a $1 million monetary assessment to the jurisdictions participating in the settlement, officials from the participating jurisdictions say.

CNO will tell consumers about the settlement starting in mid-July, officials say.

The notification mailing will include a toll-free telephone number for Lifetrend policyholders who have questions, officials say.

“CNO accrued for the financial impact of the settlement in its consolidated financial statements for year-end 2009,” CNO says in a statement about the agreement. “Therefore, the finalization of this multi-state settlement agreement will not result in an additional charge to the company’s second-quarter 2010 consolidated results of operations.”

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