State Farm Settles Class Action Lawsuit Over Life insurance Overcharges

State Farm Life and Accident Assurance Company has agreed to pay tens of millions of dollars to settle a class action lawsuit involving accusations of overcharging its customers for Life insurance policies. The lawsuit, filed in a federal court in Missouri, alleged that State Farm had been using outdated mortality tables from the National Association of Insurance Commissioners (NAIC) created by the Society of Actuaries, resulting in higher premiums for policyholders.

The settlement involves approximately 450,000 policyholders who purchased universal coverage between 1986 and 1993. The plaintiffs claimed that State Farm’s use of outdated mortality tables led to shorter lifespans being calculated for customers, resulting in higher premiums than would have been charged with up-to-date tables.

According to the lawsuit, State Farm’s conduct caused harm to policyholders by draining monies accumulated in the Cash Values of their Policies. The plaintiffs alleged that every unauthorized dollar taken from the Cash Values was one less dollar that could be used for future premiums, increasing the death benefit, or withdrawing as cash.

In addition to overcharging for Life insurance, State Farm was accused of deducting expenses from policy cash values and failing to inform agents and policyholders of how premiums were calculated, a violation of the law. The settlement also includes related cases filed in South Carolina and Tennessee.

The settlement does not constitute an admission of wrongdoing by State Farm or Accident Assurance Company. The insurers have agreed to issue Life insurance settlement checks to affected policyholders as part of the resolution of the lawsuit.

This settlement serves as a reminder to insurance companies to ensure that they are using accurate and up-to-date data in calculating premiums for policyholders. It also highlights the importance of transparency in communicating with both agents and policyholders about how premiums are determined.

Overall, the resolution of this class action lawsuit underscores the importance of consumer protection in the insurance industry and the need for companies to act in the best interests of their policyholders.