New lawsuit accuses National Life of misleading IUL illustrations

An Indiana woman filed a lawsuit last week against NLV Financial Corp. and its two life insurance subsidiaries over a 2023 indexed universal life policy that returned 0% after one year.

Sanya Virani claims the IUL relies on back-tested historical performance that does not match reality and is “a fraudulent sham.” Virani is locked into a product that is not performing as promised and comes with costly surrender fees if she were to terminate the policy, the complaint states.

Virani filed the lawsuit in the U.S. District Court for the District of Vermont, where NLV is headquartered, and requested class-action status.

Also listed as defendants are National Life Insurance Co. and Life Insurance Co. of the Southwest. The complaint is just the latest in a series of lawsuits nationwide by dissatisfied IUL policyholders who claim they were misled by rosy illustrations.

A spokeswoman for National Life released this statement: “We strongly dispute the plaintiff’s allegations, and we intend to vigorously contest them.”

One year and regret

Virani, of Fortville, Ind., purchased an IUL policy on Sept. 8, 2023, the complaint said, with a face or base coverage amount of $2,767,336. The policy offered Virani interest crediting strategies, including “Fixed-Term Strategies” and “Indexed Strategies” – the returns from which are credited to the policy’s accumulated value.

The lawsuit describes the US Pacesetter No Cap Annual Point-to-Point Indexed Strategy.

Virani allocated 100% of the accumulated value under her policy to the US Pacesetter Index, the complaint states. According to her 2024 Annual Statement issued by National Life, 0% interest was credited to her account as a result of that allocation for the period September 22, 2023, to September 21, 2024.

The plaintiff claims the Pacesetter Index was a “fraudulent sham” that advertised returns it could never deliver.

Many proprietary indices haven’t been around long enough to have a good performance history. So many insurers are using “backtested” hypothetical performance from proprietary index components. But critics say this results in misleading illustrations untethered from reality.

“The US Pacesetter Index returns and crediting rates in the Chart, which states that it includes returns for twenty years, were not based on historical information for the simple reason that the US Pacesetter Index did not exist prior to December 10, 2021,” the complaint states. “Consequently, at most, less than two years of returns could have been based on historical information.”

Sheryl Moore is president and CEO of Moore Market Intelligence and Wink, Inc. Although she is a persistent critic of misleading illustrations, Moore took note of the timing of the Virani lawsuit.

“I find it very interesting that the lawsuit was filed just over one year after the policy was issued,” she said. “Plus, consumers sign-up for the possibilities of zeros when they purchase index insurance products.”

‘Thousands of dollars’

To date, Virani has paid “tens of thousands of dollars to defendants in policy premiums,” the complaint said. She could cancel and surrender the policy. However, the surrender charge is $49,618.33 in the first year of the policy, gradually declining to $5,202.59 in the tenth year, the complaint said.

Virani claims that her policy had “no realistic chance” of ever attaining the historical returns shown in the back-tested history accompanying the index she chose.

Virani acknowledged signing a statement that read: “I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are subject to change and could be either higher or lower.”

Still, her attorneys say that should not shield the defendants from liability.

“The disclaimers in no way protect Defendants from this claim that the Indices and their Illustrations are fundamentally a false promise and fraudulent sales scheme,” the complaint reads. “Indeed, if ‘historical’ Illustrations have no value as a ‘representation of past or future performance’ of crediting rates, it is logical to question why they are provided to consumers.”

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.