The Magazine of The Evangelical Lutheran Church in America


Policyholders sue LB, AAL

At least 14 of Lutheran Brotherhood's 1.1 million policyholders and several Aid Association for Lutherans policyholders are suing the insurance providers over "vanishing premiums" described by the companies' agents.

In a Nov. 22 Minneapolis Star Tribune article, an LB policyholder said the premiums on his life insurance policy were to disappear after eight years, while the policy would continue to increase in value to $1 million. Seven years later, he still pays premiums — $27,000 so far. 

The suit claims LB agents never warned the policyholders about interest-rate risk but used illustrations to promise that premiums would vanish after a set number of years. LB spokesperson Brett Pyrtle denied any wrongdoing on the part of the insurer.

Provided by many insurers in the 1980s, the vanishing premium option allowed policyholders to pay premiums with the interest received on the invested cash. "At that time, interest rates were a lot higher," Pyrtle said. "The bottom line is that declining interest rates, not deceptive sales, made this something that did not work for every party."

Pyrtle said LB would not settle out of court. And in an official statement, AAL, which recently learned it faces a similar class-action lawsuit, said it would "vigorously defend against the action." AAL called the allegations "unfounded and misplaced," as well as a "sign of the times" in a litigious society. Aimed at replacing litigation, the insurer has a member dispute arbitration program, paid for by AAL, that members are directed to "if normal complaint-handling activities are exhausted."


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Embracing diversity