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Are life insurers raising rates on universal policies?

The Consumer Federation of America (CFA) on Monday warned insurance regulators that life insurers are quietly hiking rates on some universal life policies, possibly to compensate for losses from falling interest rates.

The Washington, D.C., consumer watchdog and advocacy group said that AXA Equitable, Transamerica and VOYA Financial (VOYA) had notified their agents about the premium hikes, but hadn't put out any public announcements.

"We are concerned that the actions taken may spread throughout the life insurance business (and) we urge state insurance regulators to assure themselves that the increases are justified," said James Hunt, the CFA's life insurance expert.

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The problem, Hunt said in an interview, is that insurers had made promises they couldn't keep, offering guarantees of 4 percent and higher yearly in their universal life policies, which are often sold as a retirement product. Universal life is a permanent insurance policy as opposed to a term life insurance policy, whereby the excess paid in premiums is credited to the policy.

By bumping up the annual cost of the policy, insurers reduce its value to the policyholders who bought the insurance.

None of the three companies had any immediate comment.

Whit Cornman, a spokesperson for the American Council of Life Insurers, which represents the industry, said he wasn't aware of any rate increases.

"Policies give insurers the right to change charges, in most cases, without regulatory approval," said Cornman, adding that "maximum charges are clearly disclosed at the inception of the policy."

Hunt acknowledged that it wasn't clear from his research how many policies were affected. In the U.S. there are millions of universal life policies, which were widely sold before the turn of the century when interest rates were high, but are less popular now. Not likely to be affected are variable life products that move with the stock market and don't have rigid guarantees.

Steve Weisbart, who handles life insurance questions for the Insurance Information Institute, said insurance regulators would certainly look at any increased charges.

Weisbart questioned whether insurers were acting because of interest rates, which are now slowly rising, or whether they had been scared by a Princeton University study which showed that mortality rates climbed half a percent each year among white middle-aged Americans between 1999 and 2013.

"They may be trying to offset future losses," Weisbart said.

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