Monday, July 11, 2016

Life Insurance in the Weeds

Over at LifeHealthPro, Ben Steverman has an interesting article about the challenges facing folks involved in the (medical?) marijuana trade, which is now legal in a handful of states. Even though these folks may have never even used their product, they're apparently having a hard time securing the coverage they need to protect their families in the event of the untimely demise.

Derek Peterson, for example, is "the chief executive officer of Terra Tech, a publicly traded pot company based in Irvine, CA." When he recently applied for life insurance coverage with Mutual of Omaha, the underwriter put the kibosh on his plans, stating that:

"We have discontinued the processing of your application for insurance due to company policy. We cannot accept premium from individuals or entities who are associated with the marijuana industry."

Okay, they're certainly within their rights to set underwriting guidelines, but this seems perhaps a bit heavy handed. It's not stated, but we can infer from the article that he wasn't actively using marijuana, merely involved in its production and distribution.

[ed: You'll notice that I didn't say "legal" production and distribution. We'll circle back to that momentarily]

The article quotes  Loretta Worters, spokesperson for the Insurance Information Institute, who observes that "[t]he problem from a life insurance underwriter’s point of view is that, unlike tobacco, there isn’t a lot of data available to assess the risks of coverage for marijuana users"

But this begs the question, since there's no indication that Mr Peterson used pot, either in the past or currently.

So I reached out to some of my own sources; one, a life insurance underwriter, told me that "I personally have not had to underwrite a client who was a pot store owner, but it would be a situation where it would be case by case review.  I think the article hit the nail on the head when she stated that there isn’t a lot of data available to assess the risks of coverage."

She pointed out that there are other industries that carriers tend to "underwrite a little more carefully- people who own bars, gun shops…..  and that again is just because of the statistics and mortality studies that we have that these people have increased incidents of alcoholism, bar fights, being robbed at gun point."

Which makes a lot of sense, but I still had my reservations.

Until I heard from a good friend who's also the field rep for one of our carriers, who I think really pegged it:

"While pot may be legal in certain states, it's still a Federal offense, and we tend to shy away from folks that are actively - and publicly - committing felonies."

Makes sense, no? Simple, straightforward, and cuts right to the chase.
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