As part of a $65 million settlement, checks for State Farm Life and Accident Assurance Company are being sent to class action plaintiffs.
States Farm was charged with overcharging on insurance by attorneys in a federal court located in Missouri. The settlement pertains to around 450,000 policyholders who purchased universal life insurance from the Bloomington-based company between 1986 and 1993.
State Farm is accused of using out-of-date mortality numbers that the Society of Actuaries created for the National Association of Insurance Commissioners, which showed shorter average life lengths than the actual figures in more recent official tables. Presumably, this would result in premiums that were overpriced.
“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,” the plaintiffs stated.
State Farm was accused of deducting expenses from policy cash values in an improper manner. Furthermore, the plaintiffs said that State Farm had broken the law by failing to disclose to policyholders—or even its own agents—how it determined the cost of insurance.
Tennessee and South Carolina cases that were connected to the Missouri federal court action were also included by the settlement.
“We are pleased the court has granted final approval of settlement in the nationwide cost of insurance class action litigation known as Niewinski v. State Farm Life Insurance Company and the State Farm Life and Accident Assurance Company. The settlement involves 86000 series Universal Life Insurance policies issued by the company from 1986 to 1993. The settlement is not an admission that State Farm did anything wrong,” the company stated in a statement.
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Attorney fees for the plaintiffs will total more than $22 million, or one-third of the settlement sum. In addition to $25,000, the amount awarded to the major claimants will depend on the extent of their overcharging.
Members of the class will receive roughly 71% of the money they overpaid, according to the case’s judge. That’s roughly $100 on average, though real amounts will differ based on a predetermined formula.
