(February 22 – 10:00 ET) – The Canada Life Assurance Co. has proposed a settlement with policyholders caught up in the debacle surrounding vanishing premiums.

Also know as vanishing premiums, premium offset is a payment option that allows a policyholder to pay for their policy using accumulated policy dividends.

However, when forecasts underpinning these concepts went awry policyholders were left with big premium bills. Many complained the policies weren’t properly explained to them. Similar actions have been launched against a number of other life insurance companies.

Canada Life and the law firms of Scarfone Hawkins LLP, Poyner Baxter Poyner, and Lauzon Belanger announced that an agreement has been reached to resolve lawsuits that were launched in Ontario, British Columbia and Quebec by policyholders who own participating whole life insurance policies sold using the premium offset concept.

Canada Life says it believes that most of its policyholders were provided with sufficient information to make informed decisions about their policies at the time of sale. Nevertheless, the proposed settlement provides an independent review process for those policyholders who feel they were given insufficient information.

The proposed settlement also provides general benefits for all eligible policyholders across Canada, not just those in the three provinces where lawsuits have been started. Every eligible policyholder will receive the general benefits without having to do anything. However, if they do not wish to participate, they can choose to “opt out”.

The proposed settlement applies to all owners of participating whole life insurance policies were issued anywhere in Canada by Canada Life between Jan. 1, 1980 and Dec. 31, 1997. These policies must have been in effect on Feb. 1, 2001 or have ended between Jan. 1, 1992 and Feb. 1, 2001 because they lapsed or were surrendered. This represents approximately 135,000 policyholders.

The settlement and related costs are not expected to have a material financial impact on Canada Life. Canada Life and the law firms representing the plaintiffs say they agree that the proposed settlement is fair and equitable. “The proposed settlement represents a fair response to customer concerns, balances our customer service objectives with our responsibility to our shareholders, and will allow us to resolve the issue,” said Bill Acton, executive vice presidnent and director, Canadian division, Canada Life.

“We are satisfied that the settlement agreement properly and fairly deals with the concerns of policyholders and we are pleased that policyholders will receive significant benefits under the agreement,” said class counsel representatives.

The proposed settlement is subject to court approval in Ontario, B.C. and Quebec, through hearings to take place in March and April. After court approval, eligible policyholders will receive a personalized mailing outlining the details of the agreement and the options available to them.
-IE Staff