Class Action Claims Wilton Reassurance Life Company of New York Overcharged Policyholders for Cost of Insurance

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A proposed class action lawsuit alleges that Wilton Reassurance Life Company of New York has unlawfully charged policyholders exorbitant cost of insurance (COI) rates.

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The 14-page lawsuit claims that, contrary to Wilton’s policies, which state that the company determines monthly COI rates based on its expectations of clients’ future mortality, the insurance firm has routinely increased cost of insurance charges despite steady improvements in mortality experience over the past several decades.

Though the company profits from the increasing life expectancy of its clients because it can collect more charges from them and pay death benefits later than anticipated, Wilton refuses to share the financial gains with its universal life policyholders, the suit claims.

Per the case, the defendant is required by the terms of its own policies to review its mortality expectations at least every five years and change COI rates accordingly. However, the insurance firm has routinely raised COI fees “using its decades-old COI rate scales that do not in any way reflect its current expectations as to future mortality experience,” the complaint contends.

Further, though Wilton is allowed under its policies to adjust COI rates to cover “expenses associated with the administration of the Policy,” such administrative costs are typically very low—between $50 and $150 a year per policy—and therefore cannot justify the thousands of dollars the company has purportedly charged clients annually for COI, the filing argues.

“It is apparent that Wilton wrongly construes its policies as granting it a nonsensical ‘heads I win, tails you lose’ power,” the lawsuit charges, “reserving the right to increase COI rates if mortality experience is worse than anticipated, but not requiring it to decrease COI rates in the face of years and years of improved mortality experience.”

Fair and proper COI rates are vital to clients with universal life policies—which provide death benefits as well as investment options—because the charges determine the monthly payment necessary to maintain the policy and, if too high, can reduce the amount of invested capital on which interest can be earned, the suit explains. What’s more, if excessive COI charges diminish the amount of money in the account to a point where policy fees can no longer be deducted, the policy will lapse, the case says.

The lawsuit looks to represent all current and former owners of universal life (including variable universal life) insurance policies issued or insured by Wilton Reassurance Life Company of New York and its predecessors in interest that provide for (a) an insurance or COI charge calculated using a rate based on expectations as to future mortality experience, (b) additional but separate policy charges, (c) an investment or savings component, and (d) a death benefit.

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