The financial services industry has emerged as an unexpected source of increased class action activity in the past year, a new survey has found.
Further, an attorney with the law firm that conducted the survey said he believes it’s only a matter of months before more life insurance carriers are sued.
At issue are cost-of-insurance (COI) class action matters that have cropped up in the past 18 months and over which the courts appear divided.
In the latest round of class action disputes involving life and annuity carriers, plaintiffs say life insurers are unfairly targeting specific groups of policyholders for premium increases. Consumer watchdogs have called upon regulators to block rate hikes on universal life contracts.
Carriers are looking to raise COI rates to compensate for low interest rates, mortality costs and people holding on to life insurance policies longer. Insurers say they are well within their contractual rights to raise premiums.
Referring to four major life insurers that recently announced rate increases, “We expect all the carriers to be sued,” Carlton Fields shareholder Stephen J. Jorden told InsuranceNewsNet. “There's a lot of chatter in the plaintiffs’ bar newsletter and it’s only a matter of months before everyone has been sued."
Class Action Spending On The Rise
The nationwide law firm Carlton Fields released its fifth annual class action survey, which showed an increase in spending on class action disputes in 2015, the first such increase in four years. Spending on class action litigation rose to $2.1 billion in 2015, marking a 3.4 percent increase compared with 2014, the survey found.
Class action litigation is expected to rise further to $2.14 billion in 2016, according to the survey. The survey data was collected from 381 large companies across 25 industries.
Class action disputes involve one or two plaintiffs suing on behalf of an entire class of plaintiffs, often numbering in the dozens, hundreds or thousands.
A proposed Consumer Financial Protection Bureau rule to limit arbitration also is expected to give rise to new class action disputes, according to the report. The annual class action survey is designed to give in-house corporate lawyers a feel for developing trends in a narrow sliver of the $19.4 billion market for U.S. legal services.
The survey found that 13.7 percent of respondents predicted a wave of class action suits flowing from a possible CFPB ruling, whereas there was no such concern in 2014, according to the report. Arbitration is designed to prevent expensive and extensive legal disputes from clogging the courts.
Consumer fraud accounted for 24.6 percent of all class action matters and 25 percent of all class action spending in 2015, the report found. Insurance-related class action disputes, excluding fraud, accounted for 7 percent of class action matters and 6.9 percent of class action spending in 2015.
Respondents indicated they each expect, on average, 2.8 new class action matters in 2016. This is an increase from 2.3 new class action matters last year and 1.5 new class action cases in 2014, the report found.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
© Entire contents copyright 2016 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.