Berger Montague Exploring Possible Fraud Within Indexed Universal Life Insurance Policies

In a class action investigation, Berger Montague has unearthed evidence to suggest that Indexed Universal Life Insurance policies may be based on fraudulently inflated return evaluations.
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An indexed universal life insurance policy is a financial product designed to offer policyholders a variable return rate on their insurance funds, usually tied to the daily rates as set by entities like Standard & Poor’s. More specifically, these policies – which are predominantly similar to traditional universal life insurance policies – allow policyholders to allocate cash values to certain equity index accounts with the goal of achieving maximum possible returns and, ultimately, a higher yield for the insurance policy beneficiary.

Recently, however, consumer advocacy groups have been fielding a number of complaints from concerned policyholders who are not realizing the return on their investments as was originally promised in the sales pitch. As with any potential consumer fraud issue, defrauded policyholders may be able to obtain compensation for the amount of money wrongfully withheld by the insurance provider, and a reputable consumer fraud attorney can help ensure that any policyholder victimized by this type of scam is provided with adequate redress.

Details of the alleged fraud

While financial experts have long been weary of the indexed universal life insurance policy concept, a new breed of problems has prompted many to advise clients away from this sort of product altogether. As of late, the following companies and products are considered high on the list for potential fraud within the indexed life insurance market, and should be treated with skepticism accordingly:

• Axa Equitable
• Pacific Life
• Indexed Universal Life Insurance
• Equity-based Universal Life Insurance
• Equity-based Life Insurance

According to our research, a majority of the fraud occurs in the “sales phase” of the purchase process, wherein the salesperson presents the consumer with an illustration of the possible policy benefits. Allegedly, these illustrations use current figures to implement projections far into the future, without taking into account the inevitable risk and volatility of stock indexes. Further, the illustrations do not account for changes in account charges to the consumer, which will undoubtedly increase over the life of the insurance product. Using a controversial “look back” approach – which is not indicative of future performance – potential clients are given a glowing outlook on the likely performance of their indexed life insurance, which is generally not grounded in financial reality.

In 2014, a settlement involving similar allegations was reached between a plaintiff and Fidelity & Guaranty Life Insurance Company and Paramount Financial Services. In that case, the plaintiff alleged four separate instances of misconduct, including “(i) misleading and deceptive sales presentations; (ii) encouraging customers to obtain a mortgage on their residence or home equity line of credit and use the proceeds to purchase IUL policies; (iii) misrepresenting the IUL policies as ‘investments’ or ‘investment plans’; or (iv) improperly describing the IUL policies’ costs, benefits and terms.”

Contact Berger Montague today

If you are aware of possible fraud or consumer protection issues surrounding indexed universal life insurance policies, please do not hesitate to contact us today for more information about this emerging issue.