Friday, March 17, 2006

Ignorance is Bliss...

When I first started in this business, my then sales manager gave me a terrific piece of advice: “Henry,” he said, “you can’t compensate for other peoples’ ignorance.”
Case in point:
I have a client, a small business with 3 principals, for whom I wrote the life insurance that funds their buy-sell agreement. These are term policies which have recently hit their renewal date, and thus a scheduled premium increase.
I met with them to go over the plans and their buy-sell calculations, and we determined that an increase in face amount (death benefit) was in order. We discussed options, and decided that new 15 year term policies (with Return of Premium option) would do the trick. Since they were pressed for time, I left applications with them, so that they could get a head start on some of the boilerplate.
Yesterday, I returned to complete the applications with them, and make arrangements for the required exams. I arrived to find that two of the three gentlemen had indeed completed their paperwork, but the third refused to do so.
Turns out, the third partner (we’ll call him “Howard”) has apparently tried to buy life insurance recently, and has been turned down – by his account – “three times this year.” Now, it’s not clear whether he meant the last 12 months, or the past 3 and a half. In any case, he went on to say that his wife had advised him not to pursue this new policy, because it would be a “waste of time.” I asked him if he was comfortable with the fact that his partners’ families would receive twice as much as his if there was a claim, but that apparently didn’t phase him.
So I asked him which companies had turned him down. He didn’t know.
Further “hunh?”
Turns out, he had actually completed the application for only one plan, but his wife has assured him that he’s been turned down three times, because she tried to get him a new plan, as well.
I asked him (tongue firmly in cheek) just how long his wife had been in the insurance business. He looked a bit confused, and replied that she wasn’t. At that point, I stopped: there’s really no honor in causing marital rifts in the pursuit of a sale. I did ask him if he would mind finding out, and telling me, the names of the other carriers his wife had (allegedly) applied to on his behalf. Then, I packed up my briefcase with the two completed applications, and made my exit.
There are a number of problems here, beginning with the fact that, if “Howard” is to be believed, his wife actually completed (and signed) applications for him. Second, an experienced agent would never let a case get to a point where there were multiple (let alone three!) declinations. Such an agent would have completed a pre-screen, spoken with underwriters at carriers which specialize in the impaired risk market, and would have already had the case placed.
What this situation tells me is that either the client (and/or his wife) was working with an inexperienced agent or that they chose to go the on-line route. How do I know this? Because I know his health history, and had already taken it into account before making my recommendations. Granted, I had no way of knowing about the three declines, but that’s not really the point.
There are no doubt situations where a term life policy may be a DIY project. But not when one knows for a fact that one has on-going (and potentially serious) medical conditions.
But I can’t compensate for “Howard’s” (or Mrs Howard’s) ignorance.
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