Phoenix rescinded the 2010 increase imposed on New York policyholders after DFS ordered the company to do so. Phoenix later imposed the "2011 increase" on New York policyholders, apparently without objection by DFS. Numerous important court documents relating to the COI increases have been sealed or heavily redacted, but I am continuing my efforts to obtain them. My June 2012 public records request to DFS remains pending. Although my public records request to CDI was denied, I obtained some documents through a public records request to OCI. See the October 2012, December 2012, and November 2013 issues of The Insurance Forum.
The September 2011 DFS Letter to Phoenix
On September 6, 2011, Michael Maffei, chief of the life bureau of DFS, sent a three-page letter to Kathleen McGah, vice president and counsel of Phoenix. He described the results of the DFS investigation into the 2010 increase and alleged that Phoenix committed five violations of New York insurance laws. He ordered Phoenix to reduce the COI rates to the rates used prior to the 2010 increase; credit the difference, with interest, to policy values; and refrain in the future from using the "funding ratio" (the ratio of a policy's accumulated value to the policy's face amount) as a basis for COI increases. The Maffei letter remains sealed in court files, but I obtained it through my August 2013 public records request to OCI. I am making the letter available as a complimentary PDF. Just e-mail me a request for the Maffei letter.
The Mills Reports
Robert Mills is an economist and director at Micronomics, Inc., an economic research and consulting firm. The plaintiffs' attorneys retained him to calculate damages in the event Phoenix is found liable for breach of contract as alleged in court complaints.
On September 16, 2013, Mills submitted a report based on data provided by Phoenix. On September 30, he submitted a supplemental report based on additional data provided by Phoenix. The reports were sealed pursuant to a protective order. On November 6, they were unsealed. The figures below are from the supplemental report.
Mills focused on the 2011 increase Phoenix imposed on New York policyholders. He said owners of 87 policies were affected by the 2011 increase, and 55 of them remained in force as of June 30, 2013. The total estimated COI overcharges for the 55 policies was $1,517,849 through August 30, 2013, and that figure will increase over time. Mills also estimated prejudgment interest (through March 31, 2014 on estimated overcharges through August 30, 2013) of $172,277 at a 9 percent interest rate (the statutory rate in New York) or $76,568 at a 4 percent interest rate (the rate Phoenix argues should be used).
Mills discussed 22 policies that lapsed between notification of the 2011 increase and June 30, 2013. He estimated that $7.95 million in premiums were paid into those policies. He also gave some lower damages figures based on the assumption that a small percentage of the policies lapsed for reasons other than the 2011 increase.
Mills discussed 22 policies that lapsed between notification of the 2011 increase and June 30, 2013. He estimated that $7.95 million in premiums were paid into those policies. He also gave some lower damages figures based on the assumption that a small percentage of the policies lapsed for reasons other than the 2011 increase.
Two Important Unanswered Questions
After their investigations, CDI and OCI ordered Phoenix to rescind the 2010 increase imposed on policyholders in those states, but Phoenix refused to do so. Question: Why did Phoenix refuse to comply with the CDI and OCI orders to rescind the 2010 increase imposed on California and Wisconsin policyholders after having complied with the DFS order to rescind the 2010 increase imposed on New York policyholders? OCI began an administrative proceeding, the results of which will not be known for some months. To my knowledge, CDI has done nothing further.
Although DFS ordered Phoenix to rescind the 2010 increase, DFS apparently did not object to the 2011 increase. Question: How did Phoenix implement the 2011 increase on New York policyholders in such a way as to avoid the problems that caused DFS to order rescission of the 2010 increase? Hopefully the question will be answered when further court documents are unsealed or DFS complies with my public records request.
Other Documents
Numerous court documents relating to Phoenix's COI increases remain sealed, and I still await numerous documents in response to my public records request to DFS. When more documents become available, I will report on them.