The Kyle Busch Lawsuit: The Real Issue Isn’t Life Insurance — It’s Greed

When trust breaks down, the entire industry feels it.

A high-profile lawsuit filed by NASCAR driver Kyle Busch and his wife Samantha Busch against Pacific Life Insurance Company has made national headlines. The Busch's put out a video that was implying they fell victim the "scam" of tax-free retirement and IULs. Kyle Busch Tiktok video . Most of the main stream news articles are extremely critical of the strategy of using life insurance to accumulate funds for tax free income in the future. The claims that are being made about IUL and the strategy is like if all of media around Bernie Madoff's Ponzi scheme talked about why investing in the stock market is a scam. But is IUL a scam? What went wrong in the Busch's case? 

The case isn’t about the legitimacy of life insurance. It’s about how greed, poor design, and misleading sales practices can weaponize a good product and damage the reputation of an entire profession.

What the Lawsuit Claims

Filed in North Carolina’s Superior Court, the Busch v. Pacific Life complaint alleges that Pacific Life and one of its agents, Rodney A. Smith, misrepresented and mis-sold multiple Indexed Universal Life (IUL) policies to the Busches.

According to the filing:

“Smith and Pacific Life represented that the policies would be fully funded and self-sustaining after a limited number of annual premium payments and would thereafter generate substantial, tax-free income for retirement.”

The complaint describes IUL designs totaling over $10 million in premiums, structured through irrevocable life-insurance trusts, that were supposed to fund a “tax-free retirement plan.” Instead, the Busches allege that the illustrations were based on unrealistic assumptions and concealed the true risk of lapse, cost-of-insurance increases, and volatile index-crediting results.

The lawsuit seeks damages exceeding $8.5 million, citing negligence, breach of fiduciary duty, and unfair trade practices.

What Actually Happened

There are still a lot of unknowns with this case. For most of us who are familiar with IULs cannot understand how it would be possible to lose over $8 million in an IUL over a 7-year period. For me initially I though there is obviously something wrong with this picture. Even an IUL funded at target premium wouldn't lose 80% of its value after 7 years. So what actually happened.

Problem 1: PDX commission structure. The way the PDX pays commission and charges the policy for it is somewhat unique to Pacific life in the type of policy. And by unique it allows the agent to get paid the most and have the features built into the policy to allow them to do so. In the Busch's case their agent maximized the YTB(yield to broker) on their policies. 

How did the agent do that? The PDX/PDX2 (and other Pacific Life policies) allows for it! Pacific life has a feature that allows some of the death benefit to be commission free ART coverage. The default on the product is 50% commission free ART and 50% base (commissionable). Instead of sticking with the 50/50 default the agent raised the base (commissionable) coverage to 100%. This in turn doubles what the commissions would ordinarily be even on a product at another carrier. This in turn DOUBLES the up-front charges on the policy. This also brings up why allow this feature to begin with? By the way Pacific life did remove this feature on their newest IUL.

Not only did the agent max out the commissions with the base coverage. He also chose increasing in the first year and planned to switch it to level in year two. Now those of you familiar with policy design are thinking why in the world would you do that. You see the typical design for an over funded life policy would be it use increasing until the client was done paying premiums. This allows the death benefit to be reduced to the lowest level, reducing expenses (and commissions). So why only have increasing in 1 year for the Busch's? Because of a feature in Pacific Life's policy that nearly triples the target (commissionable) premium. Increasing expenses even more and maximizing commissions for the agent. 

Now I am over here thinking, that illustration must have looked like CRAP! Think again, because of PDX and PDX2 design with extremely high fees which are used to buy multipliers to in turn leveraging the policy for more returns this policy would have illustrations pretty well. Of course this works extremely well in illustration land. We can get into how that worked at another time. 

That leads me to problem 2. According to Bobby Samulson's article the policies were allocated 100% to the fixed account earning 2.25%. With the extremely high charges in PDX and PDX2 these policies didn't stand a chance only earning 2.25%. They may have done OK if it was allocated properly because the markets did nothing but go up over the last 7 years. However the allocation to the fixed account over this time period is extremely hard to understand. 

Behind the scenes, policy design choices allegedly maximized commissions and carrier fees instead of long-term client performance — including inflated death-benefit options, skipped cost-reducing features, and aggressive premium patterns.

“These policies were built to fail,” the lawsuit states, “ensuring that the policies would erode in value and ultimately fail once the commission revenue had been realized.”

What Industry Experts Are Saying

To separate hype from facts, Bobby Samuelson, president of The Life Product Review, analyzed the case in detail (Nov 3 2025). His conclusion:

“The case isn’t really about life insurance in general, Indexed UL in particular, or PDX/PDX 2 specifically. It’s about the unique way Pacific Life has approached agent compensation for the last 40 years and one agent who decided to push compensation to the absolute limit for his own benefit at the expense of policy performance.”
— Bobby Samuelson, Life Product Review

Samuelson notes that the Busches’ PDX 2 policy carried a $44.5 million death benefit funded with roughly $1.5 million per year for five years — a design that created enormous internal charges:

“Roughly $2.6 in policy charges over the first 10 years for every $1 of target premium.”

He emphasizes that such structures reflect incentive distortion, not product defect:

“Permanent life insurance is a simple product — premiums go in, policy charges go out, whatever is left over earns interest. The problem is a compensation structure that can create a situation like this.”

The Real Issue Isn’t Life Insurance — It’s Greed

Indexed Universal Life (IUL) remains a legitimate, flexible planning tool when designed transparently and funded responsibly. The issue here isn’t the mechanics of the product — it’s how greed, incentives, and misrepresentation warped its purpose.

When illustrations are treated as guarantees, when “tax-free retirement” is sold without full disclosure of ongoing risk, and when agents prioritize commissions over clients, trust is the casualty.

How Advisors Should Talk with Clients About the Case

Headlines like this can make even seasoned clients uneasy. Here’s how ethical advisors can turn concern into clarity:

1. Acknowledge the Story — Then Frame It Correctly

“Yes, the Kyle Busch lawsuit is real — and it’s about greed and misrepresentation, not about life insurance itself.”
Explain that IULs don’t promise fixed returns; they require funding discipline, realistic expectations, proper design, and annual reviews.

2. Explain Your Safeguards

Show how your practice differs from what went wrong:

• Conservative, stress-tested illustrations

• How the product is designed for accumulation vs commissions

• Annual policy-performance reviews

• Collaboration with tax and legal professionals for suitability and oversight

3. Reinforce the Purpose of Life Insurance

Life insurance isn’t speculation; it’s protection, liquidity, and stability. Used properly, IUL can be used for accumulating cash.

The Lesson for Advisors and Clients Alike

The Busch v. Pacific Life lawsuit is a warning, not a verdict on life insurance. It reminds us that every illustration carries human motives behind it — and those motives must be rooted in integrity, not greed.

When advisors lead with transparency, conservative design, and fiduciary-level care, clients win — and so does the reputation of our industry.

As Samuelson concluded:

“This case shows what happens when the incentives of the agent and the interests of the client fall completely out of alignment.”

At Advisors Resource Company, we believe confidence begins with clarity — and clarity comes from putting clients first, every single time.

Sources:

• Busch v. Pacific Life Insurance Company et al., Lincoln County Superior Court, filed Oct 14 2025.

• Bobby Samuelson, “443. Busch v. Pacific Life,” The Life Product Review, Nov 3 2025 (link).