Life Insurance Company of the Southwest, connected to National Life Insurance Co., is facing a new lawsuit over its sale of indexed universal life (IUL) insurance products. The case centers on claims that the company used misleading materials when marketing these policies.
The lawsuit was filed in the U.S. District Court for Vermont and argues the insurer gave customers incorrect information about the index used in its interest crediting strategy. Specifically, plaintiffs say the company’s materials failed to explain that the index was an "excess index," not a "total return index." They also point out that the insurer showed 20 years of historical performance data, even though the index has only existed since late 2021.
The lawsuit’s lead plaintiff, Sanya Virani, originally filed a similar claim in October 2024. That case was dismissed earlier this year because under Massachusetts law, where Virani lives, illustrations and buyer’s guides aren’t considered part of a legal contract. This new complaint adds a violation of the Massachusetts Consumer Protection Act and other similar laws, expanding beyond Virani’s initial claims of breach of contract and racketeering.
Virani bought an IUL policy in September 2023 with coverage just under $2.8 million. She allocated all her accumulated value to the insurer’s Pacesetter No Cap Annual Point-to-Point Indexed Strategy. She calls the Pacesetter Index a "fraudulent sham" because it advertised returns based on more years of existence than it actually has. The suit questions why such historical performance illustrations are given to consumers if they don’t truly represent past or future results.
This lawsuit appears as regulators are paying close attention to how IUL policies are marketed. The National Association of Insurance Commissioners (NAIC) has introduced guidelines since 2015 to prevent companies from showing unrealistic return rates in their illustrations. The NAIC tightened these rules further in 2020 and 2023 and is planning additional updates expected in late 2025.
Meanwhile, sales of IUL products have been booming. Data from LIMRA shows that by the third quarter of 2025, new premiums for indexed universal life policies topped $3.2 billion for the year, making up a quarter of total life insurance sales. Most big players in this market saw growth, with policy counts rising by 8% in the quarter.
The lawsuit highlights ongoing concerns about whether insurers are providing clear and honest information to customers buying these complex policies. With regulators stepping up their oversight and the market expanding rapidly, how these cases play out could shape the future of IUL products.