Were Customers Deceived About PacLife and Minnesota Life IULs?

Questions are being raised about PacLife and Minnesota Life IULs and how these products were represented to consumers by the company. These IUL policies are currently the target of an investigation by the National Association of Insurance Commissioners as well as attorneys who are anticipating a class action lawsuit.

Did these insurers misrepresent these policies to those who purchased them? People who purchased either the Pacific Life Discovery Xelerator or Minnesota Life’s Eclipse Indexed Universal Life Insurance policies since 2014 may have done so without having full disclosure from these insurers.

About IULs

An IUL, or Indexed Universal Life insurance policy, is a specific type of life insurance policy that is advertised as offering flexibility while providing the policyholder ways to increase its value without the risks associated with stock market investments.

By itself, “universal life insurance” is a cash value instrument, the value of which is tied to expenses associated with maintaining the policy (also known as COI, or “cost of insurance”). When premiums are greater than the COI, the difference is credited to the policy, in addition to interest. Generally, this is approximately two percent, but can be greater depending on the underwriting company.

With an “indexed universal life” policy, the interest rate is tied to the markets. This is where purchasers of such policies may not have been fully aware of the risks involved.

How Consumers May Have Been Misled

When presenting insurance products to a potential customer, agents use examples, known as “illustrations,” which are intended to educate the consumer on the mechanics of the policy and offer a prospectus on future returns and benefits. When it comes to the PacLife and Minnesota Life IULs , a number of consumer advocacy groups have expressed concerns that some of these agents have overestimated or exaggerated future earnings, and/or have failed to account for bonuses and commissions – all of which can take a bite out of an IUL’s value.

The problem for consumers is the complexity of IULs, which makes them quite difficult for the average layperson to understand. Even if market indices continue to rise (by no means a forgone conclusion), hidden costs of maintaining the policy, sales commissions and other fees mean that the insured’s rate of return may be lower than if he or she had simply purchased securities through an online brokerage.

While consumers should educate themselves on policy offerings prior to purchase, they also have protective rights. Just last year State Farm was told to pay over $30 million in a class action verdict over life insurance fees.

PacLife and Minnesota Life IULs: Promises They Couldn’t Keep?

Both PacLife and Minnesota Life IULs have come with assurances that may have been unrealistic or even deceptive, such as tax-free death benefits, tax-deferred premiums, guaranteed rates of returns in the event of the insured’s sudden demise, the ability to borrow against the policy without tax consequences and caps that prevent the insured from potential market-based losses.

While all of this sounds very good on the surface, the fact is that nobody can really predict market performance – and therefore, it is virtually impossible to guarantee a fixed rate of return (which is why many funds come with the disclaimer “past performance does not guarantee future returns”).

Join a Free PacLife & Minnesota Life Lawsuit Investigation

If you purchased the Pacific Discovery Xelerator (PDX) Universal Life policy from PacLife or the Eclipse IUL from Minnesota Life in the last 5 years, you may qualify to join this universal life insurance lawsuit or class action lawsuit investigation.

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This article is not legal advice. It is presented 
for informational purposes only.