Second only to life insurance agents for being blasphemed by the life insurance buying public is the Medical Information Bureau, or MIB. The MIB is a super warehouse of health and lifestyle information gathered from life insurance applications as they are processed by member companies, and yes, when you sign the application you give the company and the MIB authorization to share that information.
A sample MIB disclosure from XYZ Life reads “Information regarding your insurability will be treated as confidential. XYZ Life Insurance Company or its reinsurers may, however, make a brief report thereon to the MIB, Inc., formerly known as Medical Information Bureau, a not-for-profit membership organization of insurance companies, which operates an information exchange on behalf of its members. If you apply to another MIB member company for life or health insurance coverage, or a claim for benefits is submitted to such a company, MIB, upon request, will supply each company with the information about you in its file. Upon receipt of a request from you, MIB will arrange disclosure of any information in your file. Please contact MIB at 866-692-6901 (TTY 866-346-3642). If you question the accuracy of information in MIB’s file, you may contact MIB and seek a correction in accordance with the procedures set forth in the Federal Fair Credit Reporting Act. The address of MIB’s information office is 50 Braintree Hill Park, Suite 400, Braintree, MA 02184-8734. XYZ Life Insurance Company, or its reinsurers, may also release information from its file to other insurance companies to whom you may apply for life or health insurance, or to whom a claim for benefits may be submitted. Information for consumers about MIB may be obtained on its website at www.mib.com.”
Big retail companies have two ways to improve their profit margins and coincidentally keep their prices competitive. They can sell more and they can fight fraud and theft. For life insurance companies that’s where the Medical Information Bureau comes in. Let’s say you apply to XYZ and get your rate class changed from non smoker to smoker because you tested positive on their nicotine use test. It triples the amount of premium you would have to pay so you have four choices. Pay up, lower your coverage and pay up, go without, or go to an insurance company that offers “no exam” life insurance. All you have to do is answer no to nicotine use, no to ever been rated or denied life insurance before and go apply. With no exam there is no test for nicotine use and you are transformed into a life insurance non smoker.
But wait. “Information exchange?” Life insurance companies share that kind of information specifically so consumers can’t game the system and cause adverse selection, a situation where the insurance company is put into an unfair position when someone doesn’t tell the truth. By law life insurance companies have to carry reserves large enough to cover normal mortality, but if an insurer issues a policy based on fraudulent information the reserves could prove inadequate.
It’s not big brother or privacy invasion. Companies become members of MIB because it cuts their bad decisions and losses. Let’s dispel with one urban legend about MIB. There is a general perception that MIB not only has information but also has XYZ company’s decision on file. Not true. ABC company may know that you tested positive for nicotine but they have no idea what XYZ did with that information. They could have changed your rate to a smoking rate or they might have declined you for lying on your application or they might have asked for a tobacco use questionnaire and found out that you smoke cigars and approved you under their special cigar use guidelines.
Being an impaired risk life insurance agent it’s safe to say that most of my clients, if they have previously applied, have information in the MIB that the company I take them to is going to find out. And if the information wasn’t in MIB, after they apply through me it more than likely will be. But that doesn’t stop agents and companies from turning one company’s decline into another company’s approval. It’s true that most of my clients have been declined or rated for life insurance before they come to me. I like that because it lets me know right where we stand and what work needs to be done, so the MIB doesn’t impair my work at all.
Now the bad news. MIB is inhabited by humans and there can be errors just like there are errors occasionally in credit reports. It happens. But, just like the disclosure above says, errors can be corrected and the MIB is very helpful in that process.
Bottom line. Good guy or Bad guy? There’s no doubt they’re good because they help the life insurance industry stay healthy and believe me, agents and clients alike really want that. If you have any questions or feel you have been treated unfairly in a life insurance underwriting decision, please call or email me directly. My name is Ed Hinerman. Let’s talk.