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Update News for August 2013
Here is a quick run-down on what you will find in this bulletin:
These topics will be dealt with in more detail throughout this bulletin.
This is the same bulletin that we have provided to our U.S. subscribers this month. It is quite relevant to the Canadian market and we would urge you to read and respond to the issues it contains, particularly "Life Insurance Claim Denials For Fraud". If you have had a life insurance policy claim denied, or know of one that was denied, we would like to hear from you. Tell us about it in an email which you can send to email@example.com. We do not need names unless you can provide an internet link to a reference to the incident on the web.
In the July 2013 Update News I personally asked you to share your views on an issue that we are having with the Simplified Issue products of United of Omaha. To sum it up quickly, we have the company's rates for those products but the company does not want us to include those rates in our software.
The July 2013 Update News contained a great more detail, including my email exchange with the company. It then posed several questions and asked subscribers to respond by email, which 30 have taken the time to do.
The results have been compiled into a report which you will find here:
The names of subscribers are not disclosed.
Our sincere thanks to each of you who took the time and trouble to address this issue. We are constantly trying to listen to what subscribers are telling us, and try to find solutions to their needs. This has been very helpful.
We would have liked a larger sampling of views; more participation. You are still welcome to comment if reading the comments of others spurs you to respond or add your thoughts. Further, we have not yet heard further from the company. During the second last week of July we emailed the company a link to the report. If additional comments are received, they will be added to those already in the report.
One of the points made by United of Omaha was that they "might" be inclined to agree to Compulife quoting their Simplified Issue products if we had separate categories for Simplified Issue products. A number of subscribers have indicated that they would also like that (see answers to question 6. Subscriber Feedback - Simplified Issue).
With that in mind the company made no guarantee that they would agree to be included even if there were a separate category. You will need to keep that in mind as you continue to read through this bulletin.
Unfortunately I see the concept of a separate category as a trap for Compulife, and I am very reluctant to walk into it. The $64,000 question is, "What constitutes a Simplified Issue product?" (see answers to question 7. Subscriber Feedback - Simplified Issue).
In case anyone has forgotten, we have been down this road before. We first experienced some negative feedback when we began to quote "Guaranteed Issue" products at our website:
To review, Compulife does not and will not quote Guaranteed Issue products in our main database simply because such products have "Graded" death benefits. This means that for the first two or three years, if the insured dies for any reason other than an accident, the policy does NOT pay a death benefit. Instead, the policy returns the premium (some with interest). If the insured lives longer than the two or three years, then the policy pays full death benefit. Most GI products have an accidental death provision from day one, but that is clearly not why they are sold or purchased.
So the idea of the graded death benefit seems straightforward. If you are uninsurable, for whatever reason, you can get one of these products and have a form of life insurance coverage. On the other hand the company has some certainty, even though they won't be reviewing your health very closely, that they have no liability if you die tomorrow (other than to give the premium back). If you live beyond the 2 or 3 years, you might just live another 10 and so the company is willing to accept the risk as some consumers will pay more premiums than either they or the company thought they would. Incidentally, did I mention that these products are VERY expensive?
So we thought that putting up a Guaranteed Issue (graded benefit) web site should be straightforward but no sooner had we put up the site than we received feedback from more than one subscriber telling us it wasn't that easy. We were advised that not all Guaranteed Issue products are the same and that not all issue in all cases or circumstances. One subscriber was very focussed on one product not being Guaranteed Issue because you could not sell one to someone who was a resident of a nursing home.
Let me state again, so that there is no confusion, that graded death benefit products will not be found in the Windows version of Compulife. Every product quoted in Compulife, if issued by the company, pays the full death benefit from day one. If the product might not pay a full death benefit from day one, the products will be found at www.gi4sale.com. We will give consideration into breaking those GI products into further sub-categories at some future point.
Back to the problem with a separate category for Simplified Issue. The "trap" as I see it is the blur between "simplified issue" products and products that can be issued with a "non-med". There are many who believe, and you can review the report yourself at Subscriber Feedback - Simplified Issue (question number 7 and 8), that any product that can be sold without a paramedical (ie. non-medical) is a simplified issue product. While I may be no expert on ins and outs of simplified issue product marketing, I'm pretty certain that a Part II non-medical questionnaire is a tad bit more complicated than the "go or no go" questionnaire used by many simplified issue products.
Therefore, there is NO DOUBT that if we attempt to create a "Simplified Issue" category, that we will face controversy over which products qualify to be labeled "Simplified Issue" and which products are not "Simplified Issue". And I am pretty certain that it will not be agents alone participating in that controversy. I have had folks from some H/O's pitch to me that their term product(s), at lower face amounts and younger ages, are simplified issue because they do not require a paramedical.
Just recently Sagicor Life asked us to divide their existing term product into two products, one that quotes at smaller face amounts and younger ages, and the other which quotes for older ages and larger face amounts. Why the split? So the product variation for smaller face amounts and younger ages could be labeled "simplified" which is the term that they use for it.
By sharp contrast, Pacific Life is rolling out a new term product called "Prime Term Life Insurance". In the company's bulletin it says about the new product:
We have requested the new rates from Pacific Life who has provided them for release sometime in August. During our discussions with Pacific Life, our contact made it quite clear to me that the company does NOT want the fact it has "simplified underwriting" disclosed in 3rd party quoting systems.
While we did not discuss that further I believe the reason is straightforward. The product is priced as a fully underwritten product. The distinction is that at smaller face amounts and younger issue ages the company is allowing it to be underwritten using a Part 2 non-medical questionnaire. What the company doesn't want is an applicant or their agent selecting the product hoping that medical problems are overlooked or not detected (in other words, anti-selection). These problems might otherwise turn up with a fuller underwriting scrutiny (ie. blood or urine). We'll discuss that more when we get to life insurance claim denials.
Once again, there are some companies who do want their non-medical, fully underwritten products promoted as simplifed issue. If we create a separate category and stuck such a product into that category, you can be almost certain that someone else with a product in that category will complain that the other product shouldn't be in that category because it's not as "simplified issue" as their product. And to a certain degree they would be right, but they don't appreciate that not every agent defines "simplified" the way that they do.
Once again, the "trap" is that Compulife will face a never ending storm of criticism for our decisions about which is which, and frankly that is just not our job - that is YOUR job. Our categories are based upon premiums and level period guarantees for those premiums, PERIOD.
If a product offers a level death benefit, and an initial premium that is level and guaranteed for 10 years, then it is a 10 year term. The exception would be if it's a 10 pay (to age 121) product. If after 10 years the premiums stops but the policy remains in force, paid-up for the life of the insured, then it isn't a 10 year term it's a 10 pay permanent policy; one or the other.
We believe that the decision as to which products should be included in any one comparison should be up to the agent. In that regard there are mechanisms within Compulife that allow an agent to decide which companies and/or product are included in comparisons (see: "Manage Product Database" on the Red Menu).
Beyond the option of "Select A Group Of Companies to Quote", there is an option called "Disable Products By Category". Once you have cut the list of the companies to those you want, using "Select A Group of Companies to Quote", you can further remove individual products from those companies by disabling individual products by category. By doing so you will end up with just those products you want to quote.
If you need one set of companies/products some of the time, and a different set of companies/products the rest of the time, then we recommend that you use the "multi-user login" (Options - Top of the Red Menu) and set up as many different scenarios as you want, giving each combination a different user ID to keep them separate. You can read more about the "multi-user" login here: Update News for May 2013
In this scenario we would recommend leaving the main/normal group of products that you quote set up in the default user which is called "MASTER". We would then recommend that you create a second user called "SIMPLE". For that user you should further cut the pack of companies/products down to just those products that you consider "Simplified Issue". When you want to compare Simplified Issue products, log in as user "SIMPLE". Otherwise, log in as "MASTER".
If you need help with any of these features please call us at (800) 798-3488. If we get too many phone calls on those, we'll do a couple of new video/tutorials.
When you pick the products and carriers then you get the products and carriers that you want and there can be no disagreement with what we do. And no matter what we do, if we create a new "simplified issue" category there will be disagreement.
Beyond that, we remain committed to adding any companies/products to our software that we do not have. If there is a simplified issue product we do not have, get us the data and we'll see that it is added. And yes, as always, if you are the first in with the rates and state approvals for that product, you will get a 10% coupon for your help.
In Canada, where we quote Critical Illness insurance policies, companies will frequently make the case that their CI product is better than another company's product because they cover different illnesses or the same illnesses differently. Some companies are offended when we put their product next to another product from a company that they don't think measures up to their standard of coverage (is this sounding familiar?). But because those CI products are different from each other we insist that companies provide us with "Specimen Policies" so that Compulife subscribers can compare contracts, not just prices.
It is conceivably possible that we could do something similar for "Simplified Issue" products. One option would be to identify a product as "Simplified Issue" by highlighting it in another color. However, in doing so we would require that a life company provide us with the application/questionnaire used to sell that product. If you double clicked on that "Simplified Issue" product you would then have a button on that screen which, when clicked, would display the application/questionnaire used to sell that product. It would then make it easy for you to review just how "simple" it would be to issue that product.
Now before anyone gets excited about that idea, the problem is that we already offer a completely free Forms Library for life companies so that they can offer applications to agents. Unfortunately only 22 of the over 100 life insurance companies that we quote have given us permission to use their forms in our forms library, despite the fact that our forms service is completely FREE to the life company. And yes, United of Omaha is one of those companies who do not provide Compulife with their forms. And I am not holding my breath that things will change. I suspect that being required to provide forms for Simplified Issue would be a condition that most companies would not be happy to cooperate with. And I don't think subscribers would be very happy if half the simplified issue products were eventually highlighted, because some life companies cooperated, but the other half weren't highlighted because those life companies did not cooperate. At that point, what's the point?
In truth most of this is all about companies trying to position their products to look as good as they can. They are trying to eliminate any situation where someone might sell a different product for whatever reason. Compulife understands that's the position of the life companies and their most loyal agents and brokers, but that is not what we do at Compulife. We are a third party, objective source of information for agents and consumers. We do not expect our subscribers to be either unbiased or objective, they each have their own opinions about what they like to sell. That's the job of the agent, and it's not Compulife's job.
The other problem is "anti-selection" where consumers or agents use these products to get insurance that would otherwise be unavailable to those who are not otherwise insureable. Life companies are deeply concerned about any mechanism that would allow an agent to shop a risk to find a way to get insurance on what would be a case the company really doesn't want to insure. It's a bit like looking for loopholes, which I am quite certain is not why life companies created these products in the first place. Most of these products were designed for the "quick sale", by agents and operations that were offering that product and only that product to the consumer.
United of Omaha's position is that some agents might use United of Omaha information in our software to sell "AGAINST" United of Omaha. In fairness to that, question number 4 in the report (Subscriber Feedback - Simplified Issue) confirmed that a certain amount of that negative selling does occur, although I think United of Omaha is over-reacting.
Can anyone really stop negative selling from happening? No. And to completely eliminate negative selling is impossible. If an agent wants to use information about a company to sell against that company, that agent is going to do it. But I don't believe that the agent who does that all the time is going to last long simply because no one is a truly successful salesperson selling against something all the time. The most successful sale people are who sell the virtues of the products that they recommend.
If a Ford salesman makes his presentation continually talking about what terrible cars GM makes, I suspect consumers will wonder why he keeps talking down GM. The customers are likely to head up the street to get GM's take on the issue.
And a lot of consumers don't like that kind of negative selling. If they ask you about a product versus the one you are recommending, you might make some comment that underlines why you think your product is better, but you never want to be so negative about another product or a consumer becomes naturally suspicious and wants to hear what the other side has to say.
Needless to say, we can't control negative sales strategies, and neither can anyone else. It doesn't happen much, because it doesn't work. To say you won't let your product be quoted as a strategy to address that, is just an excuse and not an objection.
Much of the rest of this bulletin is a repeat from last month. We will wait until September to publish a report on the responses that we have received regarding life insurance claim denials and there is some interesting information there.
We remain nervous about the basic notion of what "simplified" issue policies are and what they are for. Many agents seem to view these products as a way to put insurance on an individual who would otherwise not qualify for a fully underwritten product. I think if you consider some of the responses in the report you will see that that is a significant view shared by a number of agents. But is that really what "simplified underwriting" is for? Is it designed to let you slip-in an otherwise rated customer by the underwriters?
And if the medical underwriting questions seem simple are they really? It may be that there are less questions, but that the questions are so broad in nature that the net should catch anything and everything.
As I said, we will have more on this next month. In the meantime, here is what we talked about last month and I would strongly encourage you to add your thoughts. If you have never had a claim denial, please let us know. If you have not had a denial, but are aware of a claim denial, tell us what you know.
In the meantime, here is what we discussed last month.
Here is why I am concerned:
There is a trend in the Canadian market for life companies to decline the payment of claims for "fraud". Last week [June], when I was in Canada, I met with a subscriber who told me about a policy he himself had sold. The insured died and the claim was denied by the life insurance company AFTER the two year contestability period had expired. The reason for the decline: fraud.
I was told by the agent that the client had complained of stomach pains 4 months before applying for life insurance. He went to his doctor who could not detect anything and told him to wait and see if the pain persisted. It didn't.
Subsequently the applicant bought life insurance, about 4 months after the doctor visit. After the policy had been issued and delivered, the pains returned and the client went back to his doctor who pursued the matter further. It was during these tests and examination that the cancer was discovered. Once again, after the two year contestability period had passed, the client died and the claim was denied for fraud.
The doctor indicated that the client's story was accurate and that he was the person at fault for missing the initial diagnosis. The doctor maintains that he and the client did not know about the cancer until after the policy had been issued.
Perhaps I am stupid, but when I began selling life insurance business my understanding of the contestability provision of a policy was to catch things that were unknown to the company but known to the insured. For example, if the client had a heart attack, and did not disclose it to the company, and then died of another heart attack during the first two years of the policy, then the company could contest payment of the claim. I had understood the fraud exclusion to cover such aggregious things as a third party putting insurance on an individual and subsequently having them murdered to collect the benefits.
To me the word "fraud" is associated with criminal behavior, but no one is charging anyone in the case I am mentioning above. It seems to me that the definition of fraud employed by this company is so broad, it renders the incontestability provision, after two years, of no use.
I wish this were the only example. I am also aware of a friend, who himself was a life insurance agent for many years, who was denied a disability claim on his own life. Once again, the life insurance company is alleging fraud to circumvent the claim. No charges have been filed or will be filed, the company is simply using it as an excuse to not pay.
The problem with labeling these situations as fraud is that the company is basing their argument on "What the client knew and when did they know it?". But the real problem is that the company is assuming that the client is guilty and it is forcing the client to take the company to court to prove that they are innocent. Frankly, it's pretty un-savory stuff and should disturb everyone in the life insurance industry. After all, why would people purchase a piece of paper, saying it will pay a benefit, if in the end the company is going to not pay that benefit?
Now throw into this mix the concept of "Simplified Issue". If the health questions had been "simpler" in the first example, would that have helped or hurt the situation? Simplified issue products in Canada still have a fraud exclusion in the contestability provision. However, and based upon my conversations with agents, there seems to be a general sentiment that simplified issue products are products people can buy who would otherwise not be able to buy life if they went though a fully under written process. Would a company have happily paid the above claim on a simplified issue policy, versus a fully under written product? I sincerely doubt it.
I suspect that it would not have mattered which type of product the client had bought, the company would have denied the claim. And if that is the case, what is the point of buying/selling a simplified issue product? Wouldn't a client be better off to let the company do the complete underwriting process? It would leave the client (or beneficiary) in a better position to argue that they weren't hiding anything and were will to fully disclose their insurability.
Incidentally, I know that the incidence of claim denial for fraud is a growing problem in Canada where life insurance laws require that a fraud exclusion be included in constestability clauses. While I am not aware of any American states that require a fraud exclusion to be included in contestability clauses, I am aware that some states allow contestability clauses to include a fraud exclusion.
So here is my final question, and I would appreciate your response:
If you have, I would like to hear from you. The information that you provide will be held in strictest confidence. You don't have to give me names, and I can assure you that no names or facts will be provided, as I have done above. I am trying to determine just how widespread this problem is, and whether there is a difference in relationship to this problem between Canada and the United States.
Once again, I would urge you to give me feedback on these issues. In a very real sense, this is your software too and we are simply trying to deliver the very best product we can create.