Fort Worth Star-Telegram, Texas, Watchdog column [Fort Worth Star-Telegram, Texas]

May 27--Eighteen years ago, John Campbell bought a $100,000 life insurance policy. Since then, he's paid an annual premium of $2,600.

Now, at age 85, he's paid $47,000 into it.

Suddenly, though, the Granbury man faces a problem he didn't expect. He received a letter in March from Conseco Life Insurance Co. announcing a payment increase. It's his first in 18 years, and it's not a little one either.

If he wants to keep the same coverage, his annual bill will jump from $2,600 to $11,000.

He has no idea what to do and turned to The Watchdog. Covering his insurance costs would take two-thirds of his Social Security check. But if he drops the policy now, the $47,000 he's already paid is lost forever. Under this kind of universal life insurance policy, he gets no money back.

"To me, this appears to be a way to get me to drop the coverage or make it too expensive to maintain," he said.

Others say he's right.

Jim Hunt, an insurance expert who works with the Consumer Federation of America, says millions of people who bought universal life policies years ago face the same dilemma.

Companies counted on high interest rates to prop up their profits, but of course, rates dropped to record lows.

Campbell's problem, Hunt said, is "as dramatic as it gets."

I searched for a solution, but everybody I spoke to says what the company has done is legal.

However, "it's not morally right," said Roger Glass, who sold Campbell the policy.

(The original policy was purchased from another company that Conseco later bought.)

By forcing out customers, Glass says, Conseco makes more profit because it doesn't have to pay promised death benefits.

The company responded to my questions by saying it's inaccurate to call this price rise a premium increase: "Because of the flexible nature of the policy," a spokeswoman said, "the policyholder determines the amount and frequency of a premium paid as well as the death benefit."

Had he carefully read information the company sent over the years, Campbell could have realized that his payments weren't adequate to cover the benefit and that he would have to make adjustments. The premium and death benefits could have been adjusted only at Campbell's direction, Conseco said.

Company spokeswoman Barbara Ciesemier said, "It is important for policyholders to monitor performance of universal life policies on a regular basis and make adjustments to premiums if they find it necessary."

That's news to Campbell. He didn't understand that he was expected to authorize changes such as paying higher and more frequent premiums or lowering the death benefit. If he had started paying more years ago, he wouldn't have to pay as much today, the company said.

Campbell said he didn't pay attention: "I don't understand life insurance."

Of course, few do.

All Campbell knew was that he received a bill every year for $2,600 for his Flexible Premium Adjustable Life Policy. He paid the bill without question. He didn't heed the words flexible and adjustable.

Although it's a common problem, caused by shrinking interest rates, experts I spoke with said they've never heard of an increase as large as Campbell's.

The Texas Insurance Department investigated and determined that Conseco followed the rules. (The department does not regulate life insurance rates.)

Regulators partly blame Campbell for not studying the annual reports sent to him by Conseco showing the value of his policy as Campbell aged and interest rates dropped fast.

When answering Campbell's complaint, the company wrote state regulators in its defense that "for a number of years, we have not been charging what the policy allows us to charge."

The regulators informed Campbell in a letter that their authority is limited: "We regret that we were unable to resolve this matter to your satisfaction."

Conseco has been sued elsewhere over such increases.

A federal judge in California ruled against some of the increases last year in a class-action lawsuit by policyholders. The company appealed.

The company also announced last month that it plans to pay $20 million to settle an Indiana lawsuit. The Indianapolis Business Journal reported that the settlement will reduce the price increases for certain policyholders.

Those with terminated coverage can reinstate their policies with a cost reduction or take a cash settlement, something not offered to Campbell.

Campbell is unsure what to do.

He has paid $1,500 to keep his policy alive during a mandatory grace period. But what's next?

He can lower his coverage period from age 100 to age 90 and pay a little less ($9,800). But with only a few years left until he turns 90, he knows that doesn't make sense.

Or he can accept a $75,000 benefit instead of $100,000.

He wishes he could turn back the clock.

"I certainly wouldn't have bought this insurance if I knew what was going to happen to me."

The Watchdog column appears Fridays and Sundays.

Dave Lieber,

817-390-7043

Twitter: @davelieber

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