Florida OIR Seeks Action Against Conseco Life

The Florida Office of Insurance Regulation (Office) has ordered the Conseco Life Insurance Co. (Conseco Life) to show cause to the Office why it should not suspend or revoke the company’s license, based on allegations of mismanagement.

In addition to the allegation of mismanagement, the Order to Show Cause also alleges that Conseco Life misled Florida consumers and withheld from the Office information vital to performance of its regulatory duties.

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 Order 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 the cost for their policies would be serviced by earnings on the policy and that no additional contribution would be necessary after they had possessed their policies for eight years.

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.

At the urging of the Office and other regulators, Conseco indicated that it would send a letter on Dec. 18 to all of its Florida policyholders advising them to disregard all previous notices sent to them about their Lifetrend policy and that they will continue to receive the full benefits of their policies while the matter is under review. Conseco Life will suspend implementation of its process for collecting additional premiums for the Lifetrend product.

The policies at issue are part of a book of business assumed by Conseco Life in the 1990s when it acquired Philadelphia Life Insurance Company and Massachusetts General Life Insurance Company.

The Office is continuing to investigate Conseco Life’s business practices based on information it has received related to the company’s Lifetrend product.

Conseco has 21 days to contest the Order by filing a petition with the Office for a hearing at the Division of Administrative Hearings.