If you own a universal life policy, there is a line item inside it you have probably never seen on a statement in plain terms: the cost of insurance, or COI. It is the monthly charge the insurer deducts from your account value to pay for the pure death benefit. And on most older universal life contracts, it is not fixed — the insurer reserves the right to raise it.
For decades, that right sat mostly unused. Then, starting around 2015, a string of major carriers began exercising it — raising the cost of insurance on policies people had owned for years or decades. The increases landed hardest on exactly the policyholders least able to walk away: older insureds, holding large policies, deep into contracts they had already paid into for years. Policyholders sued. The carriers, one after another, settled — for sums that add up to well over three-quarters of a billion dollars.
— Part OneThe charge you don't see.
Universal life was sold on flexibility: pay more some years, less in others, and the policy’s cash value absorbs the difference. What made that flexibility possible is that the insurer deducts its costs — chiefly the cost of insurance — from your account value each month, rather than charging a fixed level premium.
The contracts let the insurer adjust the COI rate over time, but not for any reason it likes. The standard language ties changes to the insurer’s expectations of future mortality — how long people in your class are expected to live — and requires that any change be applied on a basis that is equitable to all policyholders of a given class. There is also a guaranteed maximum COI table the insurer can never exceed.
The theory of the contract, then, is narrow: COI can move if mortality expectations move. Here is the problem the lawsuits exposed. Over the decades those policies were in force, mortality generally improved — people lived longer, which should push the cost of insurance down, not up.
Two motives surfaced repeatedly in the litigation. First, recoupment: after years of low interest rates, the investment income carriers had counted on to support these old policies fell short, and a COI increase is a way to make policyholders cover the gap. Second, shedding the policy: many of these contracts carried generous guarantees the insurer would rather not honor. A steep enough COI increase can drain the account value and pressure the owner to lapse or surrender — which makes the obligation disappear. Neither motive is "a change in mortality expectations."
— Part TwoThe wave: 2015 and after.
The increases clustered on a specific target. As the law firm Orrick documented in its survey of the litigation, the hikes frequently hit older insureds — often age 70 and up — holding large face amounts ($1 million and more), a group heavy with policies that had been sold, in some cases, into the life-settlement market. (Orrick, “The New Wave of Life Settlement Litigation”)
Policyholders — and the investors who held some of these policies — sued for breach of contract. Their argument had three prongs:
- Mortality didn't justify it.The contracts tie COI to mortality expectations, and mortality had improved. An increase pointed the wrong way.
- The real reason was impermissible.Using a COI hike to recoup investment losses, or to push policies toward lapse, is not a contractual basis for changing the rate.
- It wasn't equitable across the class.Selectively targeting older, higher-face-amount insureds allegedly violated the requirement that changes apply equitably to all policyholders of a class.
The carriers defended the increases as legitimate responses to lower investment income and updated cost assumptions. But rather than test those defenses to verdict, most of the largest cases ended the same way: a settlement, and a promise to stop.
Mortality had improved — people were living longer. The honest direction for the cost of insurance was down. It went up.— On the 2015–2016 COI increases
— Part ThreeWhat the courts made them pay.
Between 2019 and 2023, five of the largest cases resolved in settlements that, together, exceed $800 million — most of them also freezing further COI increases for years.
| Carrier | Case | Settlement |
|---|---|---|
| AXA / Equitable | Brach Family Foundation v. AXA Equitable (S.D.N.Y.) | ~$307 million (2023) |
| Transamerica | Feller v. Transamerica Life Ins. Co. (C.D. Cal.) | $195 million (2019) |
| John Hancock | Leonard v. John Hancock Life Ins. Co. of NY (S.D.N.Y.) | up to ~$123 million (2022) |
| Lincoln National | In re Lincoln National COI Litigation (E.D. Pa.) | ~$110 million (2023) |
| Voya / Aetna | Hanks v. Lincoln Life & Annuity / Voya (S.D.N.Y.) | $92.5 million (2022) |
The lead case, Feller v. Transamerica Life Insurance Company (C.D. Cal., No. 2:16-cv-1378), ended in a $195 million settlement fund granted final approval on February 6, 2019, covering roughly 69,000 policies. The AXA/Equitable Brach case settled for a reported ~$307 million in 2023 — the largest of the group — with a multi-year freeze on further increases. John Hancock’s Leonard settlement, announced February 9, 2022, established a fund of up to $123 million and a COI freeze; Lincoln National settled its COI litigation for about $110 million with final approval in 2023; and Voya (on policies originally issued by Aetna) settled the Hanks case for $92.5 million.
The increases have not entirely stopped: a second Transamerica case, over 2022–2023 increases, reached a separate $57 million settlement in 2026, with another multi-year freeze. The pattern — raise the cost, get sued, settle, freeze — has now repeated across most of the largest sellers of the product.
— Part FourWhat it means for you.
If you own universal life — plain UL, indexed UL, or variable UL — the cost of insurance is the single most important non-guaranteed number in your contract, and it is the one most likely to move against you. The settlements addressed specific policy blocks at specific carriers; they did not make the underlying charge go away for everyone.
Request an in-force ledger — at both rates. Ask your insurer, in writing, for an in-force illustration run at current charges and again at the guaranteed maximum charges. The gap between them is your exposure if the insurer raises the cost of insurance.
Watch the account value trend. If your cash value is falling even though you're paying the same premium, rising cost-of-insurance charges are the usual cause — and a policy on that path can need a surprise premium or lapse in your later years.
Keep your statements. A documented history of the monthly deductions is what tells you — and, if it ever comes to it, a regulator — whether your cost of insurance was raised and when.
"Flexible premium" universal life was sold on the upside of that flexibility. The downside is that the insurer holds a lever — the cost of insurance — it can pull decades after you bought in. Between 2019 and 2023, five of the largest carriers paid more than $800 million to settle claims that they pulled it for the wrong reasons, against the wrong policyholders. If you own one of these policies, don't wait for a statement to tell you something is wrong. Pull the in-force ledger at the guaranteed rate, and read the number the sales illustration never showed you: what this policy costs if the insurer charges the most it's allowed to.
Educational reporting on public litigation and settlements. Not legal or financial advice. Settlement amounts are as reported in public records; consult a qualified attorney or licensed agent about your specific policy.
File 105 · Investigation · Tip line: [email protected]