Manulife’s payout to its policyholders may be replicated elsewhere in the industry
Manulife Financial’s class-action settlement receiving the rubber stamp this week could be a sign of things to come in the life insurance space. On Tuesday, The Ontario Superior Court of Justice approved a settlement worth between $1.6 million and $2.03 million to be paid to Manulife policyholders. The class alleged breaches of contract on life insurance policies dating back to the mid-80s, and according to counsel for the plaintiff Megan McPhee of Kim Orr Barristers P.C, this case may well have successors.
“While the issue in this case is idiosyncratic, we have heard from a number of other universal life policyholders who are experiencing issues with their policies,” she says. “We’re now looking into their concerns. It’s no secret that declining interest rates have wreaked havoc in the industry.”
The case in question involved life insurance policies that were originally issued by Maritime Life Assurance. That firm was acquired by Manulife in 2004, and proceedings began in 2014 when representative plaintiffs Wendell Allen and Linda Allen sued the insurance giant for breach of contract.
Their grievances stemmed from a TermPlus policy they had purchased in 1986 with a $200,000 face value and a monthly premium of $138.97. The couple also bought a policy for Linda Allen as a rider with a face value of $93,044 and monthly premium of $38.52.
With these policies, the holders pay premiums into an accumulation fund that is managed by the insurer, Manulife in this case. The insurer duly deducts the cost of insurance and general expenses from the accumulation fund, with the remaining money collecting interest.
At the heart of this dispute is the fact that the charges and the interest rate on the accumulation fund are adjustable at set times, but the insurer is required to notify policyholders of these adjustments every five years.
The Allens received no such notice until receiving a letter from Manulife in 2014 stating the premiums they had been paying were too low to sustain the policy. This meant that Wendell Allen's policy had an accumulation amount of -$15,837.41, while his wife’s policy was negative to the tune of $486.46.
Manulife informed the couple that to maintain their coverage amount, their monthly premiums would increase to $656.41 and $170.34, respectively.
Eventually, close to 170 policyholders joined the class, and they will now receive reimbursements to their accumulation accounts.
Following the approval decision, Justice Perell explained how the policyholders were now better off. "The settlement in the immediate case is excellent," he said. "It puts class members in a position that is at least equal to but often better than the position they otherwise would have been in if they had received the adjustment notices in accordance with the policy.
Having shown willingness to settle early in the proceedings, Manulife will also reinstate policies that were terminated due to surrender or lapse because of the missing adjustment notices. In an official statement, the firm was keen to stress it accepted the settlement terms unequivocally: “We are pleased that the Court has approved this settlement finding that it was fair, reasonable and in the best interests of the class.”
The positive outcome was also welcomed by the plaintiff’s legal counsel. “This settlement is better than what the class members would likely have been able to achieve at trial,” says McPhee. “We spent two years negotiating with the defendant over a number of contentious issues. In the end, Manulife agreed to do the right thing for their policyholders, and we’re very proud of the result.”
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“While the issue in this case is idiosyncratic, we have heard from a number of other universal life policyholders who are experiencing issues with their policies,” she says. “We’re now looking into their concerns. It’s no secret that declining interest rates have wreaked havoc in the industry.”
The case in question involved life insurance policies that were originally issued by Maritime Life Assurance. That firm was acquired by Manulife in 2004, and proceedings began in 2014 when representative plaintiffs Wendell Allen and Linda Allen sued the insurance giant for breach of contract.
Their grievances stemmed from a TermPlus policy they had purchased in 1986 with a $200,000 face value and a monthly premium of $138.97. The couple also bought a policy for Linda Allen as a rider with a face value of $93,044 and monthly premium of $38.52.
With these policies, the holders pay premiums into an accumulation fund that is managed by the insurer, Manulife in this case. The insurer duly deducts the cost of insurance and general expenses from the accumulation fund, with the remaining money collecting interest.
At the heart of this dispute is the fact that the charges and the interest rate on the accumulation fund are adjustable at set times, but the insurer is required to notify policyholders of these adjustments every five years.
The Allens received no such notice until receiving a letter from Manulife in 2014 stating the premiums they had been paying were too low to sustain the policy. This meant that Wendell Allen's policy had an accumulation amount of -$15,837.41, while his wife’s policy was negative to the tune of $486.46.
Manulife informed the couple that to maintain their coverage amount, their monthly premiums would increase to $656.41 and $170.34, respectively.
Eventually, close to 170 policyholders joined the class, and they will now receive reimbursements to their accumulation accounts.
Following the approval decision, Justice Perell explained how the policyholders were now better off. "The settlement in the immediate case is excellent," he said. "It puts class members in a position that is at least equal to but often better than the position they otherwise would have been in if they had received the adjustment notices in accordance with the policy.
Having shown willingness to settle early in the proceedings, Manulife will also reinstate policies that were terminated due to surrender or lapse because of the missing adjustment notices. In an official statement, the firm was keen to stress it accepted the settlement terms unequivocally: “We are pleased that the Court has approved this settlement finding that it was fair, reasonable and in the best interests of the class.”
The positive outcome was also welcomed by the plaintiff’s legal counsel. “This settlement is better than what the class members would likely have been able to achieve at trial,” says McPhee. “We spent two years negotiating with the defendant over a number of contentious issues. In the end, Manulife agreed to do the right thing for their policyholders, and we’re very proud of the result.”
Related Links:
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