Travel Advisory

Recently, some folks planning a trip to Israel applied for life insurance, and were turned down.

Now, it does happen that some people are declined for life insurance, because of poor health, or dangerous hobbies, or because they’re crack-dealers. These folks, however, were healthy, boringly employed, law-abiding citizens – who just happened to be traveling to a demonstrably dangerous part of the world.

Could have been Iraq, or Venezuela, or perhaps Chechnya. Happened to be Israel.

And so they filed a formal complaint with the Georgia Department of Insurance (because that’s where they all live); the Department, and the General Assembly, intervened on their behalf:

“Recently, legislation was introduced …to prohibit underwriting for life insurance based on an applicant’s…past or proposed future travel to the State of Israel.”

So what, you may ask.

So, this:

Regular readers of InsureBlog know that we look at these kinds of issues through the lens of risk. Just as health insurance benefits pass through the filter of “medical necessity,” life insurance underwriting encompasses risk management elements, as well. An underwriter categorizes potential insureds according to how likely it is that the company will collect $100 in premium, and then pay out $100,000 in benefits. Do that too often, and you could be talking some serious money.

So, for example, a 40 year old, 5 foot tall applicant weighing 250 pounds, taking Lipitor and who had angioplasty last spring would find it difficult to find an affordable life insurance policy, and most people would understand why.

Or, perhaps the buff 35 year old was convicted of cocaine trafficking last year, just after serving time for several armed robberies; we’d understand if such a fellow found it difficult to purchase life insurance.

There are carriers who specialize in such risks (“substandard” in industry lingo), but most carriers would quickly run away.

And if you’re planning a trip to North Korea or Syria, then it would be understandable that most carriers would decline to issue you a policy. Why? Because the risk is very great, and the premium (proportionately) is small. They don’t really care if you’re black or white, Jewish or Christian, Democrat or Republican. An underwriter never knows any of this. Nor does he care. All he knows is that, if he approves the policy and you get blown up, he’s going to have a heck of a time explaining that decision to his boss.

So why is it that these same principles don’t apply to folks traveling to Israel? Certainly, most folks who go are there are not blown up. But some are; and it’s much more likely for a visitor to Israel to become a terror victim than someone traveling to, oh, St Thomas.

And yet, the Georgia Department of Insurance and members of the legislature have determined that basic underwriting principles are irrelevant when a group of people complain about their result. It is a form of affirmative action, which actually contradicts the Department’s own statement that:

“The following acts or practices are deemed unfair methods of competition and unfair and deception acts or practices…

Making or permitting any unfair discrimination between individuals of the same class, same policy amount, and equal expectation of life…” [emphasis added]

So what will they say when a group of missionaries, planning a trip to Chenya or Iraq, are declined?

Just wondering.