Four Alabama insurance clients are suing Minneapolis-based Allianz Life Insurance Co. of North America for fraud for selling “vanishing premium” life-insurance policies that allegedly failed to act as promised.
Allianz, which denied wrongdoing in a previous class-action lawsuit, is the latest insurer to become embroiled in a vanishing premium case.
The latest lawsuits, filed May 24 in an Alabama circuit court, said that Allianz insurance agents sold policies in the 1980s and early ‘90s that were supposed to act as retirement accounts and would charge premiums for only 10 to 20 years.
Rising interest rates were supposed to build each policy’s case value to the point where additional out-of-pocket premiums were unnecessary. However, interest rates fell, leaving policyholders facing years of additional premiums.
Allianz recently settled a class-action suit involving 24,000 claimants. The four plaintiffs opted out of that settlement and sued individually, claiming the proposed settlement was insufficient.
Jan Witcor, Allianz’s deputy general counsel, said the latest suits are “in the early stages of litigations, and we look forward to resolving the litigation as promptly and as fairly as we can.”
The Alabama plaintiffs-Isola Lark, 63; Melanie McLeland, 55; Jessie Jones, 53, and Jeffrey Williams, 38, are represented by attorneys Dee Miles and Jay Aughtman. The suits allege that Allianz sold life insurance as a retirement plan, which the attorneys said is illegal in Alabama. The suits also claim that Allianz intentionally used fraudulent actuarial data in its sales presentations that never could have delivered what was promised.
For example, the attorneys said, Williams, a farmer, bough a $55,000 universal life policy in 1984 and paid premiums for the required 10 years.
After that the company began deducting premiums out of his policy’s cash value.
Now, however, a policy that was to have $10,841 in cash value only has $3,187 left. Williams has been told that unless Williams pays more premiums, his policy will eventually lapse.