General information about Senior Life Insurance Company
Senior Life Insurance Company is a life insurance provider that specializes in offering policies and coverage options to senior citizens. The company has been in business since 1979 and is headquartered in Savannah, Georgia. The agency sells life insurance coverage for people from one month through the age of 85 , as well as health insurance and short- and long-term care insurance for seniors. Its long-term insurance policies extend to 50 states. In all fifty states, the company offers affordable group health insurance for small employers. The company also offers final expense burial insurance for seniors. While its senior life insurance products have few limitations, the less expensive products—final expense and group health insurance—have various limitations.
The lawsuit against Senior Life Insurance Company
In 2015, a group of plaintiffs filed a class action lawsuit against Senior Life Insurance Company in the U.S. District Court for the Northern District of Georgia. The complaint accused the company of various misconduct, accusing it of fraud for writing insurance policies that would not pay out claims for accidental death. It also claimed that the company concealed information from policyholders regarding its incentive compensation plans that rewarded agents for writing more policies rather than evaluating suitability for coverage.
Specifically, the plaintiffs alleged that the company knowingly wrote "worthless policies" that did not pay out for accidental deaths. This included misrepresenting itself to regulators about its policies and failing to properly train its agents on the policies’ terms. After launching the investigation into these accusations, the Georgia Office of Insurance discovered more than 26,000 Senior Life insurance policies that contained exclusions for autoerotic asphyxiation. This is a common term for accidents caused when people use ligatures in a sexual manner while alone, leading to death by suffocation.
Senior Life Insurance Company soon faced additional criticism when SimplyMediocre, a whistleblower website started by long-time life insurance agent Dennis Cuba, began posting statements from insurance agents working for Senior Life. The agents claimed they were incentivized to write accidental death policies for customers even if they had a long medical history.
Grounds for the lawsuit
The legal grounds of the lawsuit pertain to the federal penalties and class action specifications laid out by the Employee Retirement Income Security Act (ERISA). Congress passed ERISA in 1974 in order to protect the rights of employees who were part of a pension plan. ERISA stipulates that many benefits employers and insurers provide are protected under this law and subject to review by authorized participants. If an employer or insurer does not abide by the ERISA, that participant may file a lawsuit to recover losses. Similar to 401(k) plans, group life insurance policies fall under the regulations set by ERISA. When outsourcing their operations to an insurance company, the employer and insurer enter into a financial relationship. Federal law dictates that the provider must be limited to certain administrative tasks, while the employer’s administrator also has some responsibilities. In this lawsuit specifically, Senior Life Insurance Company is accused of failing to pay certain claims made by eligible participants. In addition to being untrustworthy and negligent, it is also believed that the company purposely delayed claim payments to increase the time limit for filing a suit against the provider.
How the lawsuit affects insureds
The current Senior Life Insurance Company lawsuit will have a much more direct effect on your life if you currently are a policyholder of the company. Although this lawsuit is focused mainly on providing clients of the company their proper rate increases, it is likely that clients who were never given a rate increase will experience a rise in rate. It is also likely that an order will be made as to how much rates should increase.
A clause in the class action settlement against Senior Life’s parent company stated that the parent could not increase policy rates at a rate higher than that described in the original policy. This understandably infuriated many customers, but it was a negotiated clause that brought a settlement. This clause is mentioned in the ACCC legal filing and is one of many proposed changes that would overrule the original policy agreements.
Another issue that may elements of speculation, but could remain true regardless, is a potential change in policies. One of the major blocks to the original rate increase was arguments that stated that the policyholders were not made explicitly aware that the policy could run out of money. If this lawsuit does result in a large-scale reinstatement of previously agreed-upon rates, then it is possible that Senior Life Insurance Company may simply change policy agreements to make the policyholders more aware of the fact that their policy can run out of money.
It is important that Senior Life Insurance Company policyholders be aware of the potential effects that this lawsuit could have on their policy. It is hard to say exactly what those effects could be; however, early signs show that policyholders may be in for an uphill battle if they wish to retain the terms of their existing agreement.
In addition, other customers may find that their policy premiums increase faster than their income can grow. When you first sign a policy, it is fairly common that you may find yourself in the same payment bracket for many years. Annual increases may seem reasonable in the short run, but if your income or savings do not grow at a similar rate, then the future cost of your policy may become unsustainable.
Senior Life Insurance Company responds
A representative from Senior Life Insurance Company reached out to our office in Kalamazoo to offer an official response, receive a copy of the lawsuit , and offer help for people who have purchased a funeral policy under the old plan and whose premiums have risen so much they are no longer able to afford it. The representative offered that Senior Life is working with policy beneficiaries and owners to create a way to either transfer the old policy to the new policy or cash it out and send a check.
Hopefully this will provide a solution for many individuals. Legal efforts by the United States Attorney General have already created an opportunity for discount cancer treatment for many former HEMI policy holders. Hopefully Senior Life’s response here will bring a similar peaceful solution to the many people holding an old burial/funeral policy.
Possible outcomes of the lawsuit
The outcome of this lawsuit will likely depend on whether the reasons provided by the company are sufficient to cover the allegations. The Judge must consider if the company has given a reasonable amount of notice that it was planning on raising the premiums, and if that notice was sufficient to trigger the guaranteed renewal rights offered under the policy. If the company is found to have violated the contract, then it may be liable for damages or other penalties, which could include the requirement to pay all claims made to date. For its part, Senior Life Insurance has likely hired a capable team of attorneys to defend its actions. It is possible that the insurance company could win the case outright, but the plaintiffs feel there is enough evidence to suggest that the company violated the policy terms to make an outright victory unlikely.
What insureds should know
Policyholders of Senior Life Insurance Company should review their policies immediately. They also have a right to bring any questions or concerns that they have to the attention of regulators. Policyholders who have had life insurance policies with the company for an extended period of time should also ask if their policy has been "grandfathered" and ask if premiums are changing. Policyholders should also ask their agents if the monthly premiums are being paid.
Wider implications of the case
The outcome of the Senior Life Insurance Company (SLIC) lawsuit could have significant ripple effects across the life insurance industry. Should the plaintiffs win the case, there may soon be stricter regulations on how life insurance companies conduct claims investigations and claims handling. One possible outcome of the case would be the implementation of a system whereby independent investigators would look into claims for SLIC and their peers.
This would certainly benefit consumers with claims during the life of the policy as it would increase impartiality. However, it would also likely make claiming benefits more tedious as insurers could not simply rely on the work of the independent investigator when deciding whether or not to approve a claim. Given the fact that life insurers have very small profits margins, employing an independent investigator for every single life insurance claim is not economical .
The resulting heightened scrutiny from an independent claims investigator could also mean that the entire industry will feel the pinch when trying to settle claims. This is indeed a position that no insurer would like to be in and so one might ask the question; could a large number of insurers band together to oppose the outcome of this lawsuit?
While such a move is most unlikely, it is not totally impossible. If this suit did indeed lead to devastating consequences for insurers throughout the US, it is certainly possible that it could impact appointed regulators within the states as well as the Department of the Treasury which looks after Insurance Operations.
One thing is for sure – no matter which way the lawsuit swings, it is bound to have consequences for the insurance industry. It only remains to be seen whether these will be improvements for consumers or ramifications that simply make doing business more difficult and costly for insurers.