At age 80, it is hurtful, embarrassing  and infuriating to find that you  have – over 46 years – spent about $27,000 on life insurance premiums, depleted a $14,000 cash value fund and have absolutely nothing to show for it.

I didn’t expect much help when I  appealed to the insurance company,  but I was deeply disappointed and hurt  by the one-sided responses I got from  two state agencies that are supposed  to be citizen advocates  – The Iowa Insurance  Division and the Iowa  Citizen’s Aide/Ombudsman’s  Office.

Although I admitted  negligence on my part, I  believe there was equal  – if not greater- negligence  by the insurance  company, the agency  and their agents. The  state officials responded  only to what the insurance  interests had to say  and totally discounted  my evidence.

My wife and I were among thousands  of gullible policy holders who  were victimized by insurance companies  in the mid-1980s in their frantic  attempt to compete with financial  institutions when interest rates rose.  They introduced interest-sensitive  “vanishing premium” and “universal  life” policies promising policy holders  that after a few years, the interest  earned on their policies would pay in  full their life insurance premiums or  that the interest earned plus moderate  premium payments would meet their  premium obligations.

The literature is full of articles in  professional publications documenting  that insurance companies offering  these policies: (1) pressured their  agents to sell them by providing handsome  commissions; (2) encouraged  them to convince existing policy owners  to convert (“churn”) their conventional  policies into interest-sensitive  ones; (3) played down or in some cases  hid from policy holders their problems  when interest rates plummeted. These  reports also cite a large number of successful  class-action suits against insurance  companies that sold interest-sensitive  policies.

The agent’s actions

During my early years (1958-1968)  on the faculty at Iowa State University,  my wife and I purchased three conventional  life policies providing $21,000  in coverage from a local agent whom  we trusted. In 1984 he convinced us to  combine the three policies into a single  $35,000 universal life policy and  pay a minimum premium, with the  understanding that interest earned  would pay the rest of the premium.  Although he told an Insurance Division  investigator that he explained to us the  potential volatility of the new policy,  we are certain he did not. In fact, we  believe he, himself, was not aware of  the dangers of such a policy at the time  he sold it to us. We  know he did not make  clear to us that he was  in fact selling us what  was not only an “interest-  sensitive” policy  but also an expensive  term life policy whose  cost would be prohibitive  if I were to live  into my 70s. If properly  informed, we would  have never traded the  conventional policies in  for a term policy.

For several years, I  read the annual reports  which carried columnar totals showing  the policy’s face value, accumulation  value and cash value. During that period,  these reports showed incremental  increases in cash and accumulated  values. Because we trusted the information  given us by our agent, we had no  reason to suspect our policy was in  danger, and during that time there were  no indications in the reports that this  was the case.

However, my position is that the  insurance companies (which changed  hands twice, with a foreign corporation  ending up with ownership), the agency  that sold us the policy and the agents  who were supposed to service the policy  were also negligent, in that: (1) the  phrasing the company used to alert me  to the serious status of my policy was  misleading and, in fact, led me to  believe that my policy was not in jeopardy;  (2) the companies and agents  were ethically and professionally obligated  to explain in clear language  when my cash reserve was first being  allocated to make up a deficiency in  premium payments. A one-sentence  memo or one telephone call alerting  me of this would have saved us at least  $14,000, the cash value of the policy at  one point. If we had known that the  policy was in jeopardy at that time,we  certainly would have cashed in and  canceled it.

Of course, this would not have been  in the company’s nor the agent’s interests.  They benefited when I continued  for several years to make the premium  payments, while they were also diminishing  my cash reserve until it was  gone, at which time they notified me  that it would cost $3,500 to renew my  policy, and that my premiums would be  $400 a month.

New language

After about 15 years, the annual  reports began carrying the following  “important notice,” which I did read:  “Continuous Coverage: If no further  premiums are paid, … your cash value  will be depleted and your policy will  lapse on (date).” I had no reason to  believe this notice referred to me,  because I was continuing to make premium  payments. The notices did not  mention “increased” or “larger” premiums  but only “further” premiums. The  notice did not state that premiums  were being or had been paid out of the  cash value of the policy. I assumed the  statement was aimed at policy holders  who wished to temporarily use their  reserve funds to pay premiums.

I have discussed the language of the  “further premiums” statement with  several attorneys, including a veteran  attorney in the Iowa Attorney General’s  office and a state senator who specializes  in insurance/reform legislation.  They agree with my interpretation of  the statement – that it is, in fact, misleading.  The response has been the  same from insurance agents, a banker  and every other professional person  with whom I have discussed the statement.  Neither the Iowa Insurance Division  nor the ombudsman’s office officials  directly addressed my complaint  about the specific phrasing of the “further  premiums” statement. In responding  to my complaint, they cited the language  of the policy, the information in  the annual statements and the claim by  our original agent that he had  explained to my wife and me the risk  factors, and said that they did not  believe fraud had occurred.

Neither of the state agencies suggested  that the insurance company was to  any degree responsible for the severe  financial blow we suffered nor owed us  any form of redress. They did not suggest  to the company that it consider a  settlement.

The big loser, of course, is my wife.  May the insurance company and the  state officials involved in the case  remember this. I will, for as long as I  am around.

Bill Kunerth retired as a journalism  professor at Iowa State University.  He now lives in Belle Fourche, S.D.