Tallahassee, Fla. — Citing allegations of mismanagement, the Florida Office of Insurance Regulation has ordered Conseco Life Insurance Co. to show cause to the Office why it should not suspend or revoke the company’s license.
In addition to the allegation of mismanagement, the Order to Show Cause also alleges that the unit of Carmel, Ind.-based Conseco Inc. misled Florida consumers and withheld from the Office information vital to performance of its regulatory duties.
“Florida consumers deserve to know that the insurance company they are dealing with is being honest with them and that the life insurance they are paying for will be available to their loved ones when they need it,” says Florida Deputy Insurance Commissioner for Life and Health Mary Beth Senkewicz. “I will not tolerate this type of mismanagement and failure to keep policyholders and the Office informed of such egregious issues.”
Over a three-year period, from 2006 to present, Conseco Life is alleged to have misled policyholders by issuing annual statements to them that failed to indicate that their Lifetrend policies were under-funded, or that Conseco believed policyholders should be paying additional expenses or costs related to their policies.
The Office alleges further that Conseco Life failed to notify the Office that the administrative system on which the Lifetrend products were administered was deficient in that it did not fully support the analysis or calculation required to compare the cash surrender value to the applicable guaranteed values.
The Office also alleges that Conseco Life knew for at least three years that the Lifetrend product was not being properly administered, but took no known action to correct the problem.
Florida consumers had relied on representations that earnings on their policies would service the cost for the policies, and that no additional contribution would be necessary after they had possessed their policies for eight years, the Office alleges.
About 5,000 Conseco Life policyholders in Florida were first notified in letters the company sent Oct. 27 explaining that there would be an increase in their “monthly cost of insurance rates and expense charges.” About 4,500 of the policyholders also were told that their policies were under-funded. Conseco Life sent an additional letter Nov. 3 notifying policyholders that they needed to submit payments for the “shortfall” no later than Jan. 3, 2009.
According to Dow Jones, Conseco Life told the agency it would send a letter to all of its Florida policyholders to disregard all previous notices about the Lifetrend policy and they will continue to receive the full benefits of their policies while the matter is reviewed. Conseco Life also will suspend its collections of additional premiums for the Lifetrend product.
Sources: Florida Office of Insurance Regulation, Dow Jones
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