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There seems to be a mindset that life insurance applications probably won’t be approved at the rate that was quoted and applied for. This is a far more prevalent mindset today with so many hundred of thousands of applications being jammed through life insurance sweatshops like Selectquote and Lifequotes.com.

These are not fun places to work and they, in spite of the large numbers of applications, are not a good place to seek good results. Selectquote especially wants it to be well known that they process over 100,000 applications for life insurance a year. What they don’t boast about is how many policies are approved as applied, especially impaired risk life insurance applications. Or how many stay in force.

I’ve shared before that I worked for Eterm.com back in the 90’s. Eterm was near, if not at the top of the heap, the leading edge of online mega agency sweatshops. I found it so offensive that I was asked to leave after suggesting several things that might improve our image and our service. Everything was scripted and the company we were supposed to recommend was supposed to garner over 90% of our recommendations. Federal Kemper was a competitive company, but no company is legitimately the best company 90% of the time. That’s never happened and never will.

So why did we have to recommend Kemper? Eterm had a contract with Kemper that provided for a bonus if we met certain sales quotas with them. Eterm made a 95% commission on the first year premium on a 20 year term. When they reached their quota they got a 40% bonus on top of the 95%. There was no persistency criteria. In other words, Eterm had no vested interest in their customers after the first year. Reaching out and servicing those clients was considered non productive work and was shunned every time I brought it up. I asked one of the big online agency owners what they do because he claimed they did stay in touch with their clients. His answer. “They can keep up with us on our blog”. A little backwards there. Isn’t it the agent who should be reaching out to see if clients have questions or needs?

Please excuse yet another rant. The subject is disasters in life insurance. I consider disaster to be those cases that come back other than applied for. Some of the disasters are truly unforeseen such as being surprised by your out of control cholesterol. But my pet peeve is when an agent knows their is a health impairment and doesn’t do anything about it. They just send out an application to their favorite company or their mandated company and take a wild guess at how it will turn out. That is an open invitation to a disaster. Impaired risk life insurance should always, always be shopped before applying.

Two real examples from today. One client went to Lifequotes.com and was quoted preferred rates with Banner. This lady had a family history of cancer deaths, a brother and both parents, that at best would get her a standard plus with Banner. Add on past treatment for anxiety and they approved her at standard. Two companies, ING Reliastar and American General won’t even consider the family history. We’re shopping it and I would be surprised if we don’t get a preferred offer, possibly preferred plus from American General.

The other client applied through Zander Life insurance of Dave Ramsey fame. He applied for their preferred rate and was approved one rate class higher with Genworth. When he asked for an explanation he was (according to him) told that they didn’t know, that they were just the messengers. They’re not messengers. They are supposed to be professional agents and Genworth is always very clear about what caused a rate change. Not sharing that with a client is the frosting on another disaster.

Bottom line. Life insurance disasters don’t need to happen. If an agent knows the underwriting guidelines and asks all the questions up front, the only surprises should be either something the client had no idea about (elevated liver functions for instance) or the good kind where they actually get approved for a better rate than applied for.