PacLife IUL Marketing May Promise Unattainable Returns While Concealing Risks

PacLife faces legal action contending that the company misled indexed life insurance policyholders about the fees and risks associated with the policies.

Pacific Life Insurance Co. misrepresented their indexed life insurance policies in order to convince consumers to pay for this insurance, according to plaintiff Hong Li’s 2020 complaint in California state court. By leaning into the complicated nature of indexed universal life (IUL) policies, PacLife allegedly overstated the future performance of their policies while also failing to disclose the significant fees or risks consumers may encounter.

Indexed universal life insurance policies differ from other policies in their applicable interest rate. Other life insurance policies may have a fixed interest rate, which stays the same over time, or a variable interest rate, which changes over time in a reflection of the economy. In contrast, an IUL policy’s interest rate will vary depending on the performance of a certain stock market index, such as the S&P 500, according to Forbes.

Due to the fluctuating performance of these market indexes, IUL policies can have significantly higher interest rates than other policies when the market is performing well. However, when the market is performing poorly, the opposite is true. During these times, interest rates on a IUL policy may bottom out to the lowest possible rate.

Unfortunately, IUL policies are not cut and dried. Policies are linked to different market indexes and may have widely varying participation rates and other limits that change the way that market performance affects their interest rates. Adding in a policy’s individual minimum and maximum rates, it can be confusing for consumers to understand the potential for risk and rewards with IUL policies.

Essentially, the complicated nature of IUL policies may be used as a tool in deceptive marketing, according to legal action against Pacific Life.

In her PacLife IUL class action lawsuit, Li says that she and countless other California policyholders were misled by marketing materials and sales illustrations insurance representatives showed them. Despite representing IUL policies as capable of resulting in high returns, Pacific Life allegedly knew most consumers were unlikely to receive these impressive interest rates and returns.

“Using uniformly misleading marketing materials and sales illustrations, PacLife deceptively misrepresented that the PDX Policies can produce outsized returns when, in reality, PacLife knew the PDX Policies would not and could not perform as represented,” the PacLife IUL class action lawsuit contends.

Although Li brought her PacLife class action lawsuit on behalf of a Class of California policyholders, consumers from all states may have been impacted by similar policies. Attorneys are interested in speaking to PacLife IUL policyholders from all states, especially those from Arizona, California, Florida, Illinois, Michigan, Minnesota, and New Jersey.

The PacLife IUL Class Action Lawsuit is Hong Li, et al. v. Pacific Life Insurance Co., et al., Case No. 30-2020-01153426-CU-BT-CXC, in the Superior Court of the State of California in and for Orange County.