London Life Insurance Co. said Friday it will pay $180-million to settle a class action suit covering 500,000 clients who bought "premium offset" policies between 1980 and 1995.
The agreement, which still needs court approval in Ontario, British Columbia and Quebec, is the most recent in which a major North American insurer has settled with clients over the sale of contentious so-called "vanishing premium" policies.
The policies were designed so that the monthly premiums would disappear after a short period, provided interest rates remained level or fell. But rates jumped, leaving many customers facing premiums they didn't expect.
"London Life and the plaintiffs who are parties to the settlement believe the settlement will benefit all eligible clients, and they will strongly recommend its approval to the courts," the company said in a statement.
London Life, a subsidiary of Winnipeg's Great West Life group of companies, said the settlement includes enhanced benefits and a review process to deal with individual claims.
The $180-million price tag is on top of another $60-million provided to cover previous settlements, London, Ont.-based London Life said. The agreement isn't expected to have an impact on the insurer's financial results.
"The Company continues to have excellent financial strength," the company said.
Friday's announcement is the just the most recent after scores of North American insurers were hit with similar class action suits since the mid-1990s.
The first settlement reached in a Canadian class action over the policies came in September 1996, when Toronto-based Sun Life Assurance Co. reached a deal it valued at $65-million.
In April, Canada Life Assurance received court approval for a similar settlement covering about 135,000 of its clients.
Royal Bank subsidiary Westbury Canadian Life announced a similar settlement last year, as did Manufacturers Life Insurance in 1998.
With a report from Canadian Press
Terry Weber