Kansas City Life Insurance Takes Unauthorized Deductions from Policy Values, Class Action Alleges

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A proposed class action claims that Kansas City Life Insurance Company has unlawfully deducted unauthorized charges from the value of certain customers’ life insurance policies.

According to the 19-page suit, Kansas City offers universal life insurance policies that provide for an “accumulated value,” consisting of funds held in trust by the insurer, and may deduct from a policy’s value only charges identified in the policy’s terms. The lawsuit alleges, however, that Kansas City deducts more than what’s allowable by improperly including expenses as part of the monthly cost of insurance deduction.

Per the case, the defendant’s policies do not authorize Kansas City to consider non-mortality factors such as expenses when setting cost of insurance rates.

The lawsuit alleges Kansas City has breached the terms of its insurance policies by improperly draining funds from their accumulated values.

“Every unauthorized dollar taken from policy owners is one less dollar that can be used to: earn interest; pay future premiums; increase the death benefit; use as collateral for policy loans; or withdraw as cash,” the complaint states.

The lawsuit explains that universal life insurance policies such as those offered by Kansas City require a policyholder to deposit monthly premiums that add to a policy’s accumulated value. The insurer deducts certain amounts directly from premium payments and subtracts monthly deductions from the policy’s accumulated value as authorized by the policy’s terms, the suit says.

One component of each monthly deduction, the case relays, is the cost of insurance. Kansas City’s policies specify that cost-of-insurance rates are based on an insured’s age, sex and risk class, and state that the defendant will determine the rates in accordance with its expectations as to future mortality experience, the lawsuit relays. As such, the policies do not allow Kansas City to consider non-mortality factors in setting monthly cost of insurance rates, the case argues.

The suit alleges, however, that Kansas City uses other, undisclosed factors, such as expenses, when determining cost-of-insurance rates. As a result, the monthly deduction from a policy’s accumulated value is higher than the policy’s terms permit, according to the case.

“By failing to determine cost of insurance rates based on its expectations as to future mortality experience and by taking non-mortality factors into account in determining cost of insurance rates, Defendant repeatedly breaches the Policy and Class Policies by impermissibly inflating those rates such that they exceed Defendant’s ‘expectations as to future mortality experience,’” the complaint reads.

The lawsuit notes that the defendant has previously been sued over the same insurance policies in two other class action cases.

This case looks to represent anyone who owns or owned a Better Life Plan, Better Life Plan Qualified, LifeTrack, AGP, MGP, PGP, Chapter One, Classic, Rightrack (89), Performer (88), Performer (91), Prime Performer, Competitor (88), Competitor (91), Executive (88), Executive (91), Protector 50, LewerMax, Ultra 20 (93), Competitor II, Executive II, Performer II, or Ultra 20 (96) life insurance policy issued in California that was issued or administered by Kansas City Life Insurance Company or its predecessors in interest and was active on or after January 1, 2002.

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