Tuesday, July 10, 2007

Hypothetically Speaking...

We've blogged before about ethical conundrums and issues, and we've talked about how important it is to be truthful when applying for insurance.
And I believe fervently that doing the right thing is always the best choice.
One thing I would never do, for example, is encourage or condone any client misrepresenting facts when completing an insurance application. For one thing, in this age of EMR and other tech, it's just too darned easy to get "caught out," particularly when answering questions about one's own health.
Okay, Prof, so where's this heading?
Life insurance applications have always (or almost always) asked about family history: are your folks still alive? If not, when and how did they die? That kind of thing. Recently, at an online forum to which I occasionally contribute, a respected colleague discussed a recent case of his:
"So far, this person qualifies for Super Preferred. The kicker, his father passed away at age 57 of a heart attack. Now, many carriers have moved him from Super Preferred all the way down to Standard. However, there are still a few carriers that will offer Preferred and be much less expensive than the standard rates."
I've known this, of course, but for some reason I started really considering the implications:
1) What if the client had been adopted? He'd have had no way of knowing, really, whether his father was even still alive, dropped dead of a heart attack at age 32, or whatever. Does that mean he could never get super preferrred rates from certain carriers?
2) How could a carrier ever really check this? It's not like they'd have access to his father's death certificate or medical records. What if he did lie ("Dad? Oh, he was killed in a train wreck at age 92")? How would an underwriter know?
My point isn't to suggest or condone lying on an application. Rather, it's to underscore the futility of even asking the question. Yes, it's relevant (to a point): if Dad died of a stroke at age 49, then that may indicate some genetic predisposition to heart problems.
Or not.
This is one of those "gray" areas that agents (and applicants) abhor, and which carriers might be well-advised to review (and revise).
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