Ed Hinerman On Life Insurance

How Dark Can It Be, This Place Where Underwriters Hide Their Heads?

Life insurance underwriters have a tough job, determining mortality risk based on all the different health factors, assigning rates that are fair to the customer and the company. But sometimes they don’t want to deal with something, so they jumble it up and throw it back at us agents.

Before I get vague, let me just tell you some realities about life insurance companies and beneficiary designations. The companies want to be sure there is financial justification for a policy. That is to say that they want to know that the insurance they are providing is there to take care of a financial loss, and not for the purpose of creating wealth where there isn’t any. They also want to know they are not opening themselves up to adverse selection, offering insurance in a dangerous situation. I don’t have a problem with that.

Let me offer a few examples of how insurance companies look at financial justification. If there is a husband and a wife, they simply justify the amount of insurance based on a multiple of the husband’s income. If the wife is employed, insurance on her is figured the same way. If the wife or the husband is a homemaker, unless there is additional justification, they can get half as much as the employed spouse. By the way, insurance companies don’t ask how long a couple has been married, how they’re getting along, or if it is an abusive relationship.

Next, let’s say we have a man and a woman living together.  If we put the woman down as girlfriend or domestic partner, some insurance companies will want to know what common debt they have and generally question the validity of insurance, even when a couple has been together for 20 years. If they happen to be engaged and have only been together two months, no questions. Insurance companies somehow feel that the financial justification is solid if there is an engagement, knowing full well that not all engagements make it to marriage and marriage has a survival rate that is far worse than most types of cancer.

Ok, let’s step off the deep end. Two women living together who have shared a household for 10, 15, 20 years. They are domestic partners. Insurance companies want to know what common debt they have, what percentages each of them pays, what the beneficiary’s occupation is and what her income is. They also want to know if the beneficiary carries an equal amount of insurance in reverse. They question it to death even though they know the answer should simply be replacement of income. If one dies, the common household will be minus the income from the deceased.

So why am I fussing? Life insurance companies are discriminating, which, actually, they can do. It’s OK for them to give better rates to someone that is healthy as opposed to someone who is not healthy. But they are discriminating against homosexual couples and using the guise of financial justification. Again, legally they can discriminate, but they won’t come out with a company stance that they don’t want the business, or that the maximum they will allow for domestic partners, is say $250,000. They leave it up to agents to dig into their private lives and discuss why they have to meet threshholds that no one else does.

So, am I pro-homosexual? No, I really am not. Morally and spiritually I don’t agree with it. I am also morally and spiritually against divorce, living together outside of marriage, people who lie and people who own businesses that are immoral. So, should there be a sin question on life insurance applications? Should anyone who is sinning or plans to sin in the next three years be excluded from buying life insurance?

So, back to financial justification.  “Insurance companies want to know that the insurance they are providing is there to take care of a financial loss, and not for the purpose of creating wealth where there isn’t any.” So, just because a couple is same sex, is it adverse selection. I don’t think so. Is there financial justification? Probably as much as with most couples.

Bottom line. Some days insurance companies just tick me off. In case you can’t tell, this would be one of those.

Add comment November 19th, 2007

Why Turn A Deaf Ear To A Diabetes Cure?

I know that I’ve often heard that the big drug companies really don’t want to find cures for things such as diabetes and it always leaves me shaking my head. Their purported reason for avoiding the cure is that a cure would kill the cash cow they have in selling the life long treatment. I know I’m naive, but that just seems so wrong as to be, well, just so damn wrong. How can a company knowingly subject someone to a lifetime of treating an illness when they have the power to cure.

I know Allie Beatty, whose blog www.lovediabetes.com, has brought major pieces of reality into my world, thinks I wear rose colored glasses. But I wear those glasses with a passion toward knowing and sharing the truth.

And the truth still blows me away. In a New York times article, a story is told about Dr Denise Faustman’s quest to ”cure diabetes. When all signs pointed to her being on the verge of just that, a real cure, her request for research funding was turned down by the drug companies. It was even turned down by the Juvenile Diabetes Research Association.

Funding finally came from Lee Iacocca, whose wife had died from complications of type 1 diabetes. The $11 million dollars he donated and raised has gone a long way toward proving Dr Faustman’s theories correct.

”I can’t wait for the pharmaceutical companies or even government tax money to fund what looks promising,” Mr. Iacocca said. ”They are not known for high risk and they are also slow to react. We are trying to get a cure.

Bottom line. Even when someone is treating their type 1 diabetes and it is well controlled, life insurance can be inordinately expensive. How good would life be if they could put on their life insurance application that they used to have diabetes, but it’s been cured?

3 comments November 19th, 2007

Underwriting Type 1 and Type 2 diabetes!

All things being equal, underwriting type 1 diabetes and type 2 diabetes really hinge on the same issues. So, why is it that type 1 seems to incur a heavier hit than type 2?

Remember that with type 2 diabetes, underwriting focuses on age of onset, control and other risk factors. The real swing factor is age of onset. After age 50 is the best possible benchmark. 40 to 50 takes a swing into being rated even with good control and other risk factors being well controlled. Onset prior to age 40 will be treated almost the same as type 1.

The reason that age of onset is such a large factor is that, the longer the disease works on a person’s body, the higher the risk of collateral health issues such as heart disease and kidney disease. This is the primary factor in why early onset type 2  and type 1, which is almost always early onset, are underwritten basically the same.

With most type 1 diabetes onset is prior to age 30. Remember, the longer your body has to deal with the stress that diabetes puts on your systems, the harder it is for your body to keep other associated health issues at bay.  That is the reality of the way underwriters are currently looking at the two issues.

I am working with underwriters from several companies to review this logic. The truth is that there seems to be a substantial difference in favor of type 1, compared to early onset type 2. Generally speaking, if you have someone with type 1 at age 35, onset age 15, that is exhibiting good control over the disease, they are also someone who has adopted a healthy  lifestyle. If they continue to maintain that control, they should have a normal or at least near normal mortality experience.

On the other hand, if someone is diagnosed type 2 at age 35, it is generally because of some poor lifestyle choices, often poor eating habits leading to obesity. At this point the two are starting at the same age and statistics I’ve seen would indicate the person with type 2 is less likely to gain control before suffering collateral health issues. It is my contention, and unfortunately not the contention of the underwriters, that these two are on equal ground. We’re working on that.

Bottom line. Early onset is a problem, a real challenge, no matter which type of diabetes a person is dealing with. Control and a healthy lifestyle are going to win the best life insurance prices available, and for now at least, those prices are higher than later onset.

2 comments November 19th, 2007