Genworth settles class action suit over steep universal life increases

The settlement, approved this week by Judge David J. Novak of the U.S. District Court in Richmond, could affect more than 13,400 policyholders.

At issue were cost of insurance increases that took effect in December 2019 on universal life policies Genworth issued, insured or assumed, as it did, for instance, when it acquired First Colony Life Insurance.

Premiums for universal life insurance, which combines a death benefit with an investment account, are flexible, and the biggest element in determining how much policyholders pay is called the "cost of insurance rate."

While the cost of insurance charge is supposed to primarily cover projected future death claims, Genworth's actual experience was that people were living longer and that claims were not made at the rate it had expected when selling the policies as long as 20 years ago, the lawsuit said.

"For such an increase to be justified [Genworth]'s projected mortality rates would have had to double," said the lawsuit, filed by a New York trust and an Iowa policyholder.

But at the same time, Genworth was saying a pattern of longer lives and fewer than expected death claims were the main reason for premium increases for its long-term care insurance valued at $11.5 billion between 2012 and 2019, the lawsuit said, quoting a company conference call with Wall Street analysts.

In settling, Genworth — which employs thousands of people in Virginia, including many in Lynchburg — denied any wrongdoing.

A company spokeswoman declined comment.

"With this settlement, cash will be returned to the policyholders, likely before the end of the year," said Seth Ard, one of the lawyers from the Susman Godfrey law firm that brought the case.