Lawsuit: Securian, Subsidiary Advised Life Insurance Policyholders to Utilize ‘Risky’ Funding Method

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Securian Financial Group and its Minnesota Life Insurance Company subsidiary are facing a proposed class action filed on behalf of policyholders who the case says were financially injured after they were advised by the defendants to fund their life insurance plans through “structured cash flows” that eventually fell through.

The defendants, according to the case, offer life insurance policies that allow policyholders to make monthly premium payments toward the policy’s cash value in order to raise it to a target level. When the policies are fully funded, the case explains, policyholders are entitled to a death benefit, with a respective fund having accumulated enough in value as to allow policyholders to supplement their retirement income by borrowing against the policy.

In order to fund the policies, the defendants allegedly advised policyholders to utilize structured cash flows provided by non-party Future Income Payments, LLC and FIP, LLC. Through this method, the lawsuit continues, policyholders surrendered a lump sum to FIP in exchange for an income stream – monthly payments comprised of part of the amount paid to FIP plus a “pre-determined rate of return.” The advantage of this plan, the defendants purportedly relayed to proposed class members, was that policyholders would be able to put more money toward their monthly premiums than if they paid through, say, a traditional checking account. The defendants, the suit adds, supposedly represented the FIP income streams as a “safe and secure” funding mechanism that would protect policyholders’ retirement funds.

The lawsuit claims that FIP, on the other hand, obtained its funding through pension income purchases for which it would pay a lump sum to pensioners in exchange for receiving a portion of their monthly pension payments over a set time period. This business method, however, was found to be illegal, the suit goes on, as FIP was essentially offering loans without being a licensed lender while charging usurious interest rates.

After being chastised by regulators for its allegedly unlawful business practices, FIP supposedly informed proposed class members that it could no longer supply their monthly payments – leaving them with no way to recoup their lost retirement funds.

“Minnesota’s Agents acted negligently, grossly negligently, and incompetently in the recommendation and/or utilization of FIP as a funding mechanism for Minnesota’s policies,” the complaint reads, arguing that the defendants should have known the FIP funding was risky and “wholly inappropriate.”