Ed Hinerman On Life Insurance

If You’re Not Part Of The Solution…..

In preparing to help write an article about the catastrophic meltdown of traditional universal life insurance policies I was seeking some industry assistance in nailing down approximately what percentage of the total number of UL’s were in danger of imploding.

To my amazement, sort of, none of the companies I spoke with said they had any idea, not even a wild guess, at the industry percentage of policies that were based on assumptions rather than guarantees. In fact they indicated that they didn’t believe that they could even come up with those kind of figures for the business on their own company books.

Furthermore, not one company had a plan or program in place to try to determine the extent of the problem in order to give policy owners more of a heads up than the normal practice which is to send them a premium notice saying that it will take a lot more money than they’ve been paying in order to keep the policy in force. They said that was the job of the agent who should be doing annual reviews and keeping the client abreast of the health of their policy.

Well, that’s a real problem since a very small percentage of agents ever last more than a year in the business. And for those that last long enough to actually stay around and service their clients, do you really think they, the agents that sold under funded, doomed to fail, UL’s are really going to call their clients and tell them that “you’ve just blown tens of thousands of dollars on my last idea, but I have a new plan you should try?”

That is about as likely to happen as having a company write a letter to all of its’ UL customers saying that there is an inherent problem with the majority of their UL policies and they highly recommend that you get your policy evaluated soon.

Bottom line. It’s an industry wide problem. It’s an insidious problem in that policies, because of low mortality charges in the first years, can hang together for a long time before the disintegration begins. It’s enormously harmful to those that lose everything they’ve put into a policy, but even more so if they lose the policy at a point where they are no longer insurable. If you have a cash value policy, whether universal life, variable universal life or whole life. have a reputable independent agent review it with you soon.

Add comment July 30th, 2009

Are You Compliant With Your Prescribed Treatment?

Other than writing across the top of your life insurance application, “Please decline this application”, I can’t think of a surer way to get declined than to decide to blow off your doctor’s advice and substitute your own without ever discussing this with the doctor.

This is known in the industry as “non compliance” and is a straight route to a decline. Do not pass go, etc. It is actually a fairly common issue. I was interviewing a woman with MS a few days ago and when I asked what treatment she was on she said none. I asked if she had been treated at any point and she said that she had, but didn’t like the side effects of the medication so she quit taking it.

I asked if she quit taking the medication with the concurrence of her doctor and she said that she hadn’t discussed it with him and had never gone back….and had never started seeing a new neurologist. So she was going on two years without any followup or treatment based on her own good advice to herself.

Now, I’m not discounting the fact that the side effects might have been just too much, and she may have lost confidence in the doctor, but from a life insurance underwriting perspective what they want to see is a situation where she would either work with her neurologist to change medications, or if the relationship was simply not working, seek, in a timely manner, a new neurologist to take over her case.

In the absence of either of those an underwriter truly feels that they have a loose cannon on their hands and that while they can accurately make mortality assumptions based on her MS and treatment, they can’t assess what impact she will have on her own mortality.

Again, the problem is pretty common. Heart patients are asked to follow up for a stress test in a year and never do. I had one client who had colon cancer, had part of his colon removed and in spite of the oncologist’s recommendation for annual colonoscopies, he hadn’t been back to any kind of doctor in 14 years.

Bottom line. It’s OK to disagree with your doctor and to ask them to change your treatment for whatever reason, and it’s OK to change doctors if you feel you aren’t being heard, but underwriters have a decline stamp waiting for you if you simply ignore doctor’s recommendations and go your own way.

Add comment July 30th, 2009