The USAA offices in downtown San Antonio.
USAA Life Insurance Co. has settled a class-action lawsuit that impacts over 120,000 policy holders. Credit: Scott Ball / San Antonio Report

Anyone who owns or has owned a particular kind of life insurance policy from USAA in recent years could receive $50 — or much more.

USAA Life Insurance Co. has agreed to pay $90 million as part of a settlement for a class-action lawsuit alleging that holders of certain policies were systematically overcharged.

The policies in question — so-called “universal life insurance” policies — combine a savings account with a life insurance policy. These offerings are common in the industry, but critics say they are overly complicated and ripe for abuse. Unlike standard policies, monthly premium rates are not fixed and subject to change with market conditions.

Because the case settled, there was no trial and no judgement on the merits of the case rendered by a court.

The lawsuit, filed in 2017, alleged that USAA overcharged these policy owners with inflated rate factors outside of what their own policies allowed, which are limited to age, sex and “rate class.” The lawsuit also alleged that USAA concealed these additional factors.

One attorney for the plaintiffs said in a declaration that their expert calculated USAA to have overcharged its customers between $360 million to $460 million. The company disputed the allegations in a brief statement and said it acted appropriately at all times.

“We have reached a mutually beneficial settlement that allows us to avoid lengthy litigation and continue our focus on serving members,” it said in a statement.

The settlement extends to the holders of roughly 122,000 universal life insurance policies in effect since March 1, 1999.

Class members will be sent a check in varying amounts, and do not need to file a claim. They will automatically be sent a check within 30 days after a final settlement date.

The settlement is still subject to approval in a federal appeals case. A hearing for the federal appeals case is set for August 26 at the United States District Court located in San Antonio.

Attorneys representing the plaintiffs in the class action suit will collect 30% of the settlement, in addition to expenses that could total as much as $300,000. An administrator in the case will receive up to $200,000. The lead plaintiff, a 73-year-old man in Florida, will receive an additional award of up to $20,000.

Further details on the settlement are available at

Universal life insurance policies have come under fire in recent years.

Ronald Sweet, a professor of finance at the University of Texas at San Antonio and a former USAA employee himself, said insurance companies began to offer complicated products in the 1980s as a way to compete with banks and mutual funds, which had come to take an increasing share of consumer investments. Universal life insurance was one of the first products that emerged out of that time, though Sweet said it is not nearly as complex as other products offered in the industry today.

Many insurance companies often downplay the complexity of these policies during the sales process, he said.

“It’s just a recipe for unethical behavior,” Sweet said. He qualified that when he worked for USAA, “they were one of the more ethical firms in the industry.”

USAA Life, unlike many insurance companies, does not pay its salaried employees a commission for selling plans, though it does provide an annual bonus based on performance metrics.

USAA Life is one of many subsidiary companies under USAA, the San Antonio-based insurance and financial services giant.

Kevin McCarty, the former insurance commissioner of Florida who led a national task force investigating the life insurance industry, said policies that combine investments with insurance are vulnerable to abuse. These complicated plans mean “it’s more difficult for the policy holder to understand what they’re paying for.”

“Frankly, it shouldn’t be widely used in the marketplace, particularly given the breadth of other financial instruments that are out there today to invest in,” he said.

The task force he led investigated insurance companies for failing to pay beneficiaries of life insurance policies when those beneficiaries didn’t file a claim. Often, he said, the beneficiary simply did not know the policy existed.

In that instance, USAA shone as a positive example. The insurance giant was one of two companies the task force found that proactively notified beneficiaries.

Waylon Cunningham

Waylon Cunningham writes about business and technology. Contact him at