Regulators in Florida are threatening to suspend or revoke Conseco Life Insurance Co.'s license to do business in the state over allegations the company underfunded its policies.
The Florida Office of Insurance Regulation alleged this week that Conseco Life misled Florida consumers and withheld vital information from regulators.
"Florida consumers deserve to know that the insurance company they are dealing with is being honest with them and that the life insurance they are paying for will be available to their loved ones when they need it," Mary Beth Senkewicz, deputy insurance commissioner for life and health, said in a statement.
"I will not tolerate this type of mismanagement and failure to keep policyholders and the Office informed of such egregious issues."
Florida regulators allege Conseco misled policyholders from 2006 to the present by issuing annual statements that failed to indicate their so-called Lifetrend policies were underfunded. They also allege Conseco Life knew of the problem for at least three years, but took no known action to correct it.
Conseco spokesman Tony Zehnder said in a statement: "Due to an administrative platform issue at Conseco Life, some Lifetrend policyholders, over a period of years, paid lower premiums-or no premiums-because they did not receive notice from us that additional premiums were due. We regret our error."
According to regulators, Florida consumers believed their policies' earnings would cover their costs, and that no contributions were necessary after they'd been held for eight years.
On Oct 27, regulators say, about 5,000 Conseco Life policyholders in Florida received their first notification that there would be an increase in their monthly cost. About 4,500, according to regulators, also were told their policies were underfunded. Regulators say Conseco Life sent another letter Nov. 3 notifying policyholders they needed to submit payments for a "shortfall" by Jan. 3, 2009.
At the urging of regulators, Conseco now is advising Florida policyholders to disregard previous notices about their Lifetrend policies and promising to offer full benefits while the matter is under review.
Conseco Inc. acquired the policies at issue as part of a book of business it assumed when the company acquired Philadelphia Life Insurance Co. and Massachusetts General Life Insurance Co. in the 1990s.
Regulators say their investigation is ongoing.
The statement from Conseco's Zehnder added that "no policyholder received diminished benefits under their contract because of our error. Conseco Life will preserve its legal benefits while we continue to work with the Florida department to resolve concerns regarding Lifetrend policies."