Conseco Subsidiary Seeks Hearing on its License Suspension in Florida

Jan. 13, 2009 – Officials for the Conseco Life Insurance Company have requested a hearing with Florida insurance officials after they threatened to suspend or revoke the insurer’s license to do business in the state due to allegations of company mismanagement and misleading consumers.

The Florida Office of Insurance Regulation accused the Conseco Life Insurance Company of misleading consumers about the funding of its universal life insurance policies issued in Florida. The state agency also is accusing the insurer of withholding information state officials need to perform their regulatory duties.

State regulators have ordered Conseco Life Insurance Company officials to show why its Florida license should not be revoked or suspended for misleading approximately 5,000 life insurance customers in the state.

Officials for the Florida agency said that since 2006, officials for Conseco Life issued annual statements to policyholders that failed to indicate their Lifetrend policies were under- funded. State officials also allege Conseco Life knew for at least three years that Lifetrend, which the life insurance company acquired in the mid-1990s, was not being properly administered but company officials took no action to correct the problem.

Because its policies lacked proper funding, Conseco Life Insurance Company officials in November demanded their customers pay to make up the difference. Conseco Life sent out letters notifying the about 5,000 policyholders affected of the increase in their monthly rates, and about 90 percent of them were told that their policies were under-funded. Conseco Life sent another letter a week later notifying policyholders they needed to submit payments for the shortfall no later than Jan. 3.

Company officials since issued a statement admitting they erred but said they would preserve their “legal rights” while resolving the situation. Conseco Life responded it will work with the agency to resolve concerns about its Lifetrend policies. The company noted the allegations primarily concern an administrative issue that Conseco Life management voluntarily brought to insurance regulators’ attention in Florida and other states and is working to correct.

In the meantime, the company has a 90-day nationwide moratorium on further action on these policies, said Conseco. The company added that because of the problem at Conseco Life, some Lifetrend policyholders paid lower or no premiums for several years because they didn't receive notice that additional premiums were due.

“No policyholder received diminished benefits under their contract because of our error,” Conseco Life officials said in a statement.

A hearing date has not been scheduled.