State insurance chief quizzed on Conseco deal

Iowa Insurance Commissioner Susan Voss appeared before a special joint meeting of the Senate and House Commerce Committees on Tuesday to answer questions on an agreement reached with Conseco Life Insurance Company in March.

Under Iowa law, Voss was unable to get restitution for Iowans who were overcharged by the insurer. Instead, she fined Conseco $750,000 for wrongfully removing parts of life insurance policies without telling customers.

Conseco denied that it violated Iowa laws or insurance regulations but paid the fine. However, details of the agreement were kept confidential in a “memorandum of understanding.” Since the Iowa Insurance Division (IID) agreed not to proceed with further action against Conseco, it did not issue a final report, which would have been public record.

The IID had investigated Conseco's use of an obscure pricing mechanism, called an R-Factor, which lowers insurance policy costs but also works to the disadvantage of the owners when used with a life insurance policy.

As a result of a class-action lawsuit against Conseco in a California federal court, the company agreed to a settlement that would collectively give policyholders nationwide up to $400 million in cash or credits. About 1,000 Iowans may be entitled to a portion of that money.

Voss said the IID’s agreement with Conseco allowed Iowa policyholders to benefit from the California action and allowed the state to collect the civil penalty.

"Our number one concern is consumer protection,'' Voss said.

The Commissioner cannot legally order Conseco or any other insurer to make restitution to policyholders. When asked by committee members, Voss said changing Iowa law to allow such action would be beneficial. Several lawmakers expressed interest in pursuing legislation that would open up the IID's limited authority over the companies it regulates.

Documents regarding Conseco are available on the Insurance Division’s Web site at http://www.iid.state.ia.us/news_media/whatsnew.asp.