Transamerica, the US unit of Dutch insurer Aegon, has agreed to pay $195m to resolve charges of raising monthly deduction rates on certain universal life policies.
The lawsuit relates to nearly 70,000 universal life policies enacted between 2015 and 2016.
The insurer said that the rate adjustments were driven by low long-term interest rates, as well as expectation changes for future mortality experience.
“The capital and pre-tax IFRS impacts are expected to be in the range of the amount of the settlement,” Aegon said in a statement.
Affected policyholders will receive monetary awards along with protection against new increases on their policies for five years. However, policyholders also have the provision to opt out.
Transamerica will pay the settlement, subject to court approval, into a common fund and absorb the attorneys’ fees and administrative expenses.
Consumer Watchdog founder Harvey Rosenfield said: “The charges that Transamerica applied to people who owned these universal life insurance policies caused tremendous surprise and stress for the people who received them, many of whom are now senior citizens, and some of whom are quite elderly and on fixed incomes.
“Our number one goal was to get as much money as we could back to these policyholders as quickly as possible. It took two years of hard-fought litigation, but we have accomplished our goal.”