Axa Files for Dismissal in COI Dispute

Axa Equitable Life Insurance has asked a court to dismiss a class-action claim filed in the wake of the insurance company’s move last year to increase cost-of-insurance (COI) rates on a block of universal life policies.

Citing contractual language within the policy allowing the company to raise rates, and the approval from New York regulators, plaintiffs failed to show a breach of contract and claim is further barred by the so-called Filed Rate Doctrine.

The dispute involving Axa and the Brach Family Foundation is one of several lawsuits contained in the latest round skirmishes between life insurers and policyholders that have cropped up in the past 18 months.

Carriers Transamerica, Banner Insurance, William Penn Life and Voya Financial have announced cost-of-insurance hikes to some of their universal life insurance products to compensate for low interest rates, mortality costs and policyholders holding on to life insurance policies longer.

In response to the cost-of-insurance increases, consumer groups have called upon regulators to block the rate hikes on the universal life contracts.

Legal experts expect insurance carriers to be sued in connection with the COI increases but the courts will eventually whether the complaints have any merit.

Regulator Finds Rate Increase 'Unobjectionable'

In legal documents filed Monday in U.S. District Court, Axa argues through attorneys with Millbank, Tweed, Hadley & McCoy that the Brach Family Foundation’s claim of breach of contract involving Axa’s Athena Universal Life II program has no merit.

In addition to the Brach Family Foundation’s “defects in the contract claims,” a review of the COI rate hike by the New York Department of Financial Services last fall forecloses any type of recovery, Axa said in a legal filing.

“Under the Filed Rate Doctrine, an adjustment to an insurance charge accepted by an expert regulator is insulated from judicial review here,” the company said.

In an October 2015 letter signed by Thomas K. Hartman, the supervising actuary for life in the Life Bureau of the DFS, the DFS found that raising COI changes on policies issued to policyholders 70 an above with face amount of $1 million or more was “unobjectionable.”

“We are satisfied that the increase is justified for each block of policies (i.e., with and without no lapse guarantee) when they are looked at separately,” Hartman wrote.

Axa further argued that the Brach Family Foundation had no insurable interest in the $20 million policy issued in 2007 on the life of Rosalia Perlmutter. Such policies are known as Stranger-Originated Life Insurance (STOLI) policies.

“Plaintiff, in other words, appears to be seeking to profit from the death of an elderly woman to which Plaintiff has no relationship other than a financial interest in her early demise,” Axa said in the legal filing.

No phone number is listed on the website of the Brach Family Charitable Foundation, which was established in 1997 to help underserved populations and promote social justice.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.