Conseco Life Insurance was intending to triple the cost of its premiums. This increase would affect around 50,000 people who had purchased life insurance from that company. A recent ruling by a federal court in California has prevented Conseco Life Insurance from doing so.
Recently, Blue Shield, another insurance company, was in the news when it announced that it would be raising the cost of it’s health insurance premiums by 59%. Blue Shield gave its customers only about two months warning of this impending change. Clearly, this big increase in the price of health insurance would be a burden for many, if not all, of the people who purchased health insurance from Blue Shield.
Conseco Life Insurance wanted to triple the cost of its life insurance premiums. Imagine having your life insurance company suddenly inform you that you must now pay three times as much each month for the life insurance policy that you have held for ten years or more! Most people would have great difficulty coming up with the extra money, and would not be able to afford that. Senior citizens, who are living on a retirement income, may find it impossible to continue to afford their life insurance policy. It seems incredibly unfair, and a nasty way to treat customers who have been faithfully paying their insurance premiums for so many years.
The specific increase would have been placed on their Valulife and Valuterm universal life insurance policies. These were sold to customers between the late 1980’s and the early 1990’s. It seems that in 2002, Conseco Life Insurance filed for bankruptcy. To make a somewhat complex story short, Conseco chose to cut their losses. They selected the Valulife and Valuterm life insurance policies, and decided to impose a sharp increase on the premiums, tripling the cost, when the policies reached their twenty first year, (which would hit in 2010 or 2011). This went to court, and the federal judge decided that Conseco was not allowed to triple their premiums.
One would hope that the court decision would deter other insurance companies, who were thinking about charging their customers dramatically increased rates, from going ahead with that idea. Life insurance policies are designed to make a profit for an insurance company when that policy is new. Gradually, these policies make less and less money for the insurance company. This is how it is supposed to work. Conseco Life Insurance is planning on filing an appeal, and fighting the court’s ruling.
Image by Derek Hatfield on Flickr