The insurer has agreed to pay tens of millions to settle the suit involving overcharges
State Farm Life and Accident Assurance Company are issuing life insurance settlement checks as pay out for a class action lawsuit against the companies.
The lawsuit was filed in a federal court and involved overcharging accusations
Attorneys representing the class action lawsuit accused State Farm in a Missouri federal court of having overcharged its customers for life insurance policies. The massive settlement involves allegedly overcharging about 450,000 policyholders who purchased universal coverage between 1986 and 1993.
According to the accusations, State Farm had been using mortality tables from the National Association of Insurance Commissioners (NAIC) created by the Society of Actuaries, but that were out of date. As a result, the tables they were using indicated shorter lifespans for those customers than would be the true average had they used the newer official tables from those organizations. As a result, the premiums being charged were allegedly higher than they should have been had up-to-date tables been used.
It was for this reason the insurers were accused of overcharging for life insurance
“Defendants’ conduct has caused, and continues to cause, material harm to Plaintiffs and the Class by wrongfully draining monies they have accumulated in the Cash Values of their Policies. Every unauthorized dollar taken from the Plaintiffs’ and Class members’ Cash Values is one less dollar that accumulates with interest and that can be used to: pay future premiums; increase the death benefit; use as collateral for policy loans; or withdraw as cash,” said the filing by the plaintiffs.
State Farm was also accused of having deducted expenses from the policy cash values. The plaintiffs also said that State Farm had failed to inform both its own agents and policyholders of how the life insurance premiums were calculated, which is a violation of the law.
Related cases in South Carolina and Tennessee
With this federal court settlement of the Missouri case, there has also been a settlement for two similar and related cases that were filed in South Carolina and Tennessee.
The settlement is not an admission by State Farm or Accident Assurance Company of any wrongdoing.
