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Update News for July 2013    

Here is a quick run-down on what you will find in this bulletin:

These topics will be dealt with in more detail throughout this bulletin.

I Am Personally Asking For Your Help on This

This bulletin contains a copy of an email exchange between myself and representatives of United of Omaha. The basic issue is that the company has products it does NOT wanted quoted/compared in Compulife, and has other products that it does want quoted/compared.

When Compulife first began 30 years ago there were lots of companies that did not want their products in Compulife. We took the position that we did not care, and that if we could get our hands on company documents that set out the function and prices for the products that we would include them anyway.

Our longstanding view remains that the prices of products sold to the general public are NOT a trade secret and those prices and facts about those products are not subject to copyright laws.

If I wanted to reproduce and distribute copies of the documents from a company, then I believe that I need the company's permission. That is why we only provide forms for companies who have given us permission to do so. If a company won't give us permission, then we will not provide their forms. If we were handing out copies of rate cards/books, the same copyright rules would apply. However, if I use the rate cards/books as a resource to obtain information about a product sold to the public, and place that information into my own documents (or in this case, software program), I am not infringing on anything. That is why we still quote products for companies who have not given us the information directly. As long as the information comes from company documents such as rate books, state approval lists, etc., we will add the company to our quote/comparison software.

It is rare for a company that is normally quite helpful in providing us with information to say that they will give information about one product but not another. It's usually all in or fold.

It should be noted that we deeply appreciate the majority of companies who are helpful in providing us with their product information. We certainly value the assistance and don't want to do anything to jeopardize what is already a working arrangement. However, we sometimes face situations where we are forced to make a choice and I want you to fully understand the dilemma in which we from time to time find ourselves.

To the more specific situation at hand. We currently quote two types of products for United of Omaha: term and no lapse UL. While it is relatively easy to get our hands on term rate books, getting premiums/rates for no lapse UL is a completely different matter. Usually a company will need to generate premium or rate tables it does not distribute to agents. It is from those tables (usually spread sheets) that Compulife is able to construct rate tables that allow us to quote those no lapse UL products in our system. If Compulife was not given those tables, we would not be able to quote those products.

With respect to no lapse UL products, United of Omaha has been very helpful. That is also the case in providing us with the rates for their "Term Life Answers" term product portfolio. However, the company also has a product line that is called "Term Life Express" which is a simplified issue product that is typically sold in the mortgage insurance market. By contrast to fully under written products, these simplified products are higher in price but more convenient to a quicker sales process with a much shorter health questionnaire.

We believe a significant number of our subscribers sell these products based upon our conversations with different individuals who have provided information about such products, or who have asked for those products to be included in Compulife.

In the case of United of Omaha, the company at one time provided us with the rates for the Term Life Express product. That was quite helpful and those who wanted the product in our service were glad to have it.

We subsequently and more recently received a request from the company to remove those products from Compulife. Normally we would ignore such a request, and explain our position as set out in the first paragraphs of this bulletin. However, the company had been the source of that information and so we honored their request and removed Term Life Express.

In removing those products I took the position that if someone else wanted the product in Compulife they would have to provide us with the rate and product information. And sure enough, one of the agents who sells those products sent us the rate book and state approval information that we need to add the product. Not wanting to unduly offend United of Omaha, I sent the company an email which prompted the following email exchange. Following the email exchange I have some questions for you and I am asking that you to take the time to respond by email. Anonymous copies of your email comments will be passed along to United of Omaha and we will be reporting on the results next month.

Here is the email exchange with United of Omaha:

At that point I requested permission to provide this discussion to our subscribers and give subscribers an opportunity to weigh in on the discussion. The company indicated that it was alright to do so.

In responding to this I want you to remember that this goes beyond the immediate situation at hand. From time to time we receive input from life companies about how we should do things and if we are not inclined to agree with that input we can be subject to pressure to change our minds. Sometimes it's an easy decision. There are times when the request/suggestion is so obviously contrary to our basic mission that it is easy to say no. Other times, the request/suggestion is quite helpful and it is quite easy to say yes.

This is not one of those times. We are facing a decision that has positives and negatives.

Normally, and as I have said before, I would simply include the products. But as I said earlier, United of Omaha has been helpful with no lapse UL products. Could they change their mind about provide us the UL information - that's certainly possible. On the flip side, and from the company's point of view, it's hard to have our subscribers quote and sell those products if they are not in our software.

On a side note, we have asked United of Omaha for their forms so we can add the forms to our forms library. Despite the fact that having their forms in our system is a FREE service to companies, United of Omaha has not provide us with their forms.

It may well happen that we place the Term Life Express into our system and nothing happens.

Please send me an email with your thoughts. As I said, I will make your comments anonymous and provide them (in aggregate) to United of Omaha (as I have done with the emails above). Please consider the following questions/points as you respond. In fact, feel free to copy and paste the following questions into your email, and put your response below:

When Is A Guaranteed Issue Policy Not?

Please be careful as you weigh in on the last questions.

Not long ago Compulife decided to step into the arena of quoting Guaranteed Issue products by creating the web site Not long after we created the site we began to receive feedback from some subscribers arguing that not all products in those comparisons should be in the comparisons. Those making such distinctions pointed out that while all the products had similar graded benefits in the beginning, that some were not really guaranteed issue because they still had certain conditions attached to their issuance. For example, one company would not issue a policy if the applicant was residing in a nursing home, while another company didn't have the stipulation.

My question to those who think Simplified Issue products should be segregated into their own categories is, are all Simplified Issue products equally simple to apply for. Some will say that some have only a handful of questions while others have more. What if another product has more questions or less questions. Should they be considered equal.

If we create a separate category, then companies will begin to target the category. Some will argue they too have a simplified issue process, but may have products that are really no different than other non-simplified issue products. Some companies will not doubt argue that anything that is "non-medical" is simplified issue.

Frankly, I see a lot of trouble trying to define these products.

Life Insurance Claim Denials For Fraud

On another front I am nervous about the basic notion of "simplified" issue. If the medical underwriting questions seem simple are they really? It may be there are less questions, but so broad in nature, that the net should catch anything and everything.

Here is why I am concerned:

There is a trend in the Canadian market for life companies to decline the payment of claims for "fraud". Last week, when I was in Canada, I met with a subscriber who told me about a policy he himself had sold. The insured died and the claim was denied by the life insurance company AFTER the two year contestability period had expired. The reason for the decline: fraud.

I was told by the agent that the client had complained of stomach pains 4 months before applying for life insurance. He went to his doctor who could not detect anything and told him to wait and see if the pain persisted. It didn't.

Subsequently the applicant bought life insurance, about 4 months after the doctor visit. After the policy had been issued and delivered, the pains returned and the client went back to his doctor who pursued the matter further. It was during these tests and examination that the cancer was discovered. Once again, after the two year contestability period had passed, the client died and the claim was denied for fraud.

The doctor indicated that the client's story was accurate and that he was the person at fault for missing the initial diagnosis. The doctor maintains that he and the client did not know about the cancer until after the policy had been issued.

Perhaps I am stupid, but when I began selling life insurance business my understanding of the contestability provision of a policy was to catch things that were unknown to the company but known to the insured. For example, if the client had a heart attack, and did not disclose it to the company, and then died of another heart attack during the first two years of the policy, then the company could contest payment of the claim. I had understood the fraud exclusion to cover such agregious things as a third party putting insurance on an individual and subsequently having them murdered to collect the benefits.

To me the word "fraud" is associated with criminal behavior, but no one is charging anyone in the case I am mentioning above. It seems to me that the definition of fraud employed by this company is so broad, it renders the incontestability provision, after two years, of no use.

I wish this were the only example. I am also aware of a friend, who himself was a life insurance agent for many years, who was denied a disability claim on his own life. Once again, the life insurance company is alleging fraud to circumvent the claim. No charges have been filed or will be filed, the company is simply using it as an excuse to not pay.

The problem with labeling these situations as fraud is that the company is basing their argument on "What the client knew and when did they know it?". But the real problem is that the company is assuming that the client is guilty and it is forcing the client to take the company to court to prove that they are innocent. Frankly, it's pretty unsavoury stuff and should disturb everyone in the life insurance industry. After all, why would people purchase a piece of paper, saying it will pay a benefit, if in the end the company is going to not pay that benefit?

Now throw into this mix the concept of "Simplified Issue". If the health questions had been "simpler" in the first example, would that have helped or hurt the situation? Simplified issue products in Canada still have a fraud exclusion in the contestability provision. However, and based upon my conversations with agents, there seems to be a general sentiment that simplified issue products are products people can buy who would otherwise not be able to buy life if they went though a fully under written process. Would a company have happily paid the above claim on a simplified issue policy, versus a fully under written product? I sincerely doubt it.

I suspect that it would not have mattered which type of product the client had bought, the company would have denied the claim. And if that is the case, what is the point of buying/selling a simplified issue product? Wouldn't a client be better off to let the company do the complete underwriting process? It would leave the client (or beneficiary) in a better position to argue that they weren't hiding anything and were will to fully disclose their insurability.

Incidentally, I know that the incidence of claim denial for fraud is a growing problem in Canada where life insurance laws require that a fraud exclusion be included in constestability clauses. While I am not aware of any American states that require a fraud exclusion to be included in contestability clauses, I am aware that some states allow contestability clauses to include a fraud exclusion.

So here is my final question, and I would appreciate your response:

If you have, I would like to hear from you. The information that you provide will be held in strictest confidence. You don't have to give me name, and I can assure you that no names or facts will be provided, as I have done above. I am trying to determine just how widespread this problem is, and whether there is a difference in relationship to this problem between Canada and the United States.

Once again, I would urge you to give me feedback on these issues. In a very real sense, this is your software too and we are simply trying to deliver the very best product we can create.