Two pieces of news provide a flicker of hope amid the doom and gloom.
A U.S. life insurance unit of French financial services group Axa is the target of a lawsuit alleging the company harmed policyholders who bought coverage for their juvenile children by classifying all of those children as smokers.
The lawsuit, filed in U.S. District Court for the Southern District of New York, seeks class-action status on behalf of policyholders who bought life policies for their juvenile children from Axa Equitable Life Insurance Co. The complaint doesn't give a range of dates for the proposed class of plaintiffs.
According to the complaint, Axa Equitable Life, part of the Axa Financial Inc. segment of Axa (NYSE:AXA), harmed the policyholders by classifying the covered juveniles under a "juvenile smoker rate scheme."
"Pursuant to the Juvenile Smoker Rate Scheme, Equitable, unbeknownst to the policyholder or insured, priced life insurance policies on juveniles, and/or structured the interest and dividends on such policies, based on rates applied to individuals who smoke, even though the insureds were non-smoking infants and children at the time the policies were issued," the complaint said.
The complaint alleges that, even though the policy applications for minors stated the covered individuals were nonsmokers, Equitable routinely charged rates, and paid lower interest and dividends, as if the covered individuals were smokers. The complaint also alleges that Equitable withheld that rate scheme from the policyholders.
"The Juvenile Smoker Rate Scheme has been successful for Equitable," the complaint said. "Indeed, since the commencement of its scheme, Equitable has received and continues to receive millions of dollars of premium income and retained interest and dividends on the juvenile life insurance policies described in this complaint."
Attempts to reach Axa for comment weren't immediately successful.
Plaintiffs' attorneys are seeking compensatory and punitive damages; imposition of a constructive trust and an "appropriate" claims-resolution facility to administer payments to members of the class; and litigation costs to be paid by Equitable.
The complaint was filed by the law firms Hanly Conroy Bierstein Sheridan Fisher & Hayes LLP and Beasley Allen Crow Methvin Portis & Miles PC. The lead plaintiff is Larry E. Richards, a Vincent, Ohio resident who owns two adjustable life plan policies bought in 1985 and 1994 to cover each of two children at the time.
Axa Equitable, formerly Equitable Variable Life Insurance Co., is among the largest U.S. life insurers, according to A.M. Best Co.'s company reports. Along with its affiliate Axa Life & Annuity Co. [formerly Equitable of Colorado Inc.], Axa Equitable markets a wide variety of life insurance and annuity products, including traditional and term life insurance, variable and fixed annuities, and variable and interest-sensitive life products.
Axa Financial is a diversified financial services organization with nearly $600 billion in assets under management at year end 2004, of which nearly 90% represents investments managed for third-party retail and institutional clients. Through its operating subsidiaries, AXA Financial provides a broad spectrum of insurance and investment-management services to both the individual and institutional marketplaces.
Until recently, insurance and annuity operations were conducted principally through Axa Equitable and Axa Life & Annuity. With Axa Financial's 2004 acquisition of MONY Group Inc., a broader range of life and annuity assets were added to the segment.
Axa Equitable Life currently has a Best's Financial Strength Rating of A+ (Superior).
(By David Pilla, senior associate editor, BestWeek: David.Pilla@ambest.com)