State acts to protect consumers from unexpected insurance invoices

Conseco Life Insurance Company is the focus of an administrative action by the Iowa Insurance Division after the company demanded customers pay previously unbilled invoices in bulk.

The state agency has issued a cease and desist order to the insurance company after receiving complaints from many of the company’s customers that hold universal life policies.

The demand of payment by Jan. 4, 2009 was made of 168 Iowa policyholders. According to the company, an internal administrative error allowed the policies to be maintained without sufficient premium payments. A letter sent by Conseco last month, and a follow-up letter that went out last week, informed the customers that their policies will be cancelled if the money is not paid by the deadline. In many cases, the amount due is in the thousands.

Steven M. Stecher, president of Conseco Insurance Group, said that policyholders, over a period of years, paid lower premiums or skipped premiums altogether because they did not receive notice from the company that additional premiums were due.

“After explaining this issue to the Iowa Insurance Division and other key regulators, we are bringing the administrative platform into conformance with the terms and conditions of the Iowa insurance contracts, and we are reaching out to policyholders to explain our actions and present options, including paying the premiums due to bring their accounts current or making other changes in their policies to lower premiums,” Stecher said in a prepared statement.

Iowa Insurance Division Commissioner Susan Voss, however, issued a statement with a different view of the company’s response to the errors.

“This attempt to lay the consequences of the company’s error on the backs of its customers after years of assurance that the policies were in order is intolerable,” said Voss. “We tried to work with the company to get them to cooperate in withdrawing their demands. Their refusal to do so now requires our immediate administrative action. We simply can’t leave these consumers agonizing over this unplanned expense, especially in these troubled economic times.”

According to Stecher, it is important to note that none of the additional premiums that policy holders choose to pay will go to the company. The premiums, said Stecher, will go to the policyholders’ accounts in order to maintain their insurance protection. No policy will immediately lapse because of the actions and no policyholder received diminished benefits under their contract because of Conseco’s error, he added.

In addition, Conseco states that he has processed nearly 400,000 claims int he past 12 months for Iowa policyholders and has paid out approximately $61.5 million in policy claims and benefits.

Angel Robinson, the state consumer advocate for insurance, has attended the agency’s meetings with Conseco and is “appalled at the company’s blatant attempt to take advanage” of the Iowa consumers.

“This company could have chosen to do the right thing by consumers on its own, but has refused,” said Robinson, noting that the state felt legal action was its only remaining recourse.

The cease and desist order was signed this morning and is effective immediately, although the company has a right to a hearing within 30 days of the order. Consumers with questions about this action and how it impacts their policies with Conseco should call the state agency‘s information line at 877-955-1212.