Friday, November 10, 2006

Forest Gump Insurance

In the movie "Forest Gump" the lead character played by Tom Hanks was noted for saying "Stupid is as stupid does". Insurance buyers are not necessarily stupid, but they are ignorant when it comes to matters of risk management and insurance.

Stupid is defined as "lacking or marked by lack of intellectual acuity", while ignorant is "uneducated or lacking specific knowledge".

I had a Forest Gump client in the last few weeks. Like most of my clients, they were ignorant of the risks involved. The wife had a medical history that was going to be difficult to overcome while the husband was in relatively good shape. As it turned out the wife was declined (not surprising) but the husband was offered coverage.

We chose a particular carrier to submit the application because this carrier is more liberal on cancer history than others. Both the husband & wife are 62 so the rate was not inexpensive. They wanted a high deductible plan. More specifically, they wanted hospital only coverage.

I explained that half of all claims paid by carriers were for hospital charges and what they really needed was a comprehensive major medical plan. I assumed, incorrectly as it turns out, that they would understand my comments about hospital only coverage since the wife had gone through surgery, chemo & radiation for her cancer. She also takes medication in hopes of warding off a return of the cancer.

She was declined; his policy was approved with a $500 monthly premium. They were out of town while all this was transpiring so I sent them an email & left a voice message about the outcome.

She was not pleased at being declined (even though I had warned it was a possibility). She told me they were not interested in the policy for her husband. Seems he had found "just what we need" with a deductible that was half the one I quoted and also half the premium.

Turns out they bought the hospital only plan I had warned them against.

These people are not stupid, but they are ignorant of the risk involved. Ignorant is as ignorant does.

At least that is what Forest Gump would say.
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