Office of the Attorney General News Release Archive


Thursday, January 3, 2002

ATTORNEY GENERAL CORNYN WARNS TEXANS ABOUT PENDING CLASS ACTION INSURANCE SETTLEMENT

65,000 Could Be Affected by Conseco's Plans; Attorney General's Lawsuit Would Require Clear Disclosures on Future Insurance Company Rate Increases

AUSTIN - Texas Attorney General John Cornyn today issued a consumer warning to Texans who once had or continue to carry certain long-term care insurance policies. A pending class action settlement in Pennsylvania may adversely affect consumers' rights regarding previous and future rate increases on these policies.

The Attorney General encourages these consumers to respond in writing by Jan. 18, 2002, to notices mailed recently by Conseco Senior Health Insurance Co. and its affiliates. Customers who respond by the deadline have the option of withdrawing - or "opting out" -- from this settlement to avoid being enrolled in the class action case.

"This settlement proposal is not fair or adequate for Texas consumers, many of whom are senior citizens, when compared to the rights they give up," said Attorney General Cornyn.

"I urge former policyholders not to discard these mailed notices, because doing so will automatically enroll you among the class action participants, whether you want to join or not. Please read the notices carefully and seek legal advice if needed before deciding to participate as a class member in this national settlement," Attorney General Cornyn said.

Attorney General Cornyn filed a Texas lawsuit last July to require clear disclosures about these rate increases before consumers purchase the policies, a requirement not addressed by the pending national class action case. The state's case is pending in a Travis County district court.

The companies in the proposed national settlement include Conseco and affiliated companies - ATL Life Insurance Co., Transport Life Insurance Co., JCPenney Life Insurance Co. and Pioneer Life Insurance Co. Long-term care policies cover the costs related to daily living assistance, especially for senior citizens, if they become disabled or cannot take care of themselves.

The companies began mailing notices about the proposed settlement to current and former policyholders on Dec. 28. By order of the Pennsylvania court, policyholders who receive these notices will be automatically enrolled in the class action case unless they take the initiative to "opt out" in writing. Texas policyholders have only until Jan. 18 to opt out of the case, an action strongly urged by Attorney General Cornyn if they choose not to participate.

The proposed settlement would pay no refunds to Texas policyholders and would broadly shield Conseco and other affiliates from liability for past and future rate increases on these policies.

The settlement would allow the companies to continue to increase rates on these policies, and consumers participating in this class action would be required to acknowledge this as an acceptable business practice.

Approximately 65,000 Texans purchased the policies and more than 20,000 currently have active policies. The nationwide settlement will potentially affect 750,000, most of whom are senior citizens or persons approaching retirement age.

Thousands of Texas policyholders saw rate increases ranging from 14 to 43 percent within the first few years of their policies. Some saw increases barely one year after they purchased them. Moreover, these rate increases do not require approval from the Texas Department of Insurance.

And while members of the class action settlement can purchase annuities and life insurance from Conseco at a discount, these products are unrelated to the long-term care policies and rate increases at issue.

"Indeed, the Pennsylvania settlement, if approved by the court, would actually require participating consumers to acknowledge that the companies may raise rates in the future," Attorney General Cornyn added. "This strikes me as patently unfair."

The Texas Attorney General has filed a brief in Pennsylvania objecting to the settlement. This can be viewed online at www.oag.state.tx.us/consumer/classaction.pdf.

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