First things first, a correction. Last column I discussed the two different “play or pay” penalties which an employer of 50 or more employees might pay if they did not comply with the Affordable Care Act (ACA, also known as Obamacare). In 2016 those fees have been increased as follows: $2000 = $2160 for 2016 and $3000 = $3240 for 2016. That much more reason to be sure your group is in compliance!
CBS news show “60 minutes” recently aired a segment titled “Not Paid” where it covered investigations of multiple life insurance companies that alleged that the companies has intentionally not paid claims on life insurance policies. It was a disturbing article, because it painted a picture that alleged these were intentional schemes.
I started my career in 1978 with Mutual of New York, which at the time was the oldest mutual life insurance company in the country. AS a new agent, one of my “opportunities” was to reach out to what were known as “orphan” policyholders. These are people who bought life insurance from an agent that was no longer in the business.
The theory was that by providing service to these folks the agent would have an opportunity to make new sales. We were given a checklist of issues to cover with the insured, one of which was to review beneficiary designations. I would also ask about their coverage with other companies to help them to update information with all the companies.
One of my favorite stories is about a man I met in Red Bluff. He was in his late 50’s He shared a horrific story about how he had been caught in a tire shredder as a young man. His face was greatly disfigured and he also opened his shirt to show me the rats nest of scars that extended from his face down to his waist from the event.
In reviewing his contract, I noticed that he had a waiver of premium benefit on his policy. This provision states that if he is disabled for 6 months or longer, the company will refund his premium payments and pay the premium for him the extent of the disability.
When I explained this feature was incredulous. I explained to him that they had no way of knowing he was disabled and he had to make the claim-and that I would do that for him. He was still unconvinced. “If you get this paid, I will dance on the table at Denny’s” he exclaimed.
I completed the form for him to sign, obtained the appropriate physician information and submitted the form. After about 45 days he received a check for thousands of dollars. The company continued to pay his premiums. He had no need for additional insurance, but I left him my card.
As I was listening to the 60 minutes story, I thought of him. I never heard from him again. Of course this was decades ago, so I expect he has since passed. Did anyone in his family find the policy and make a claim? I have no idea. At this point, I do not even remember his name. He was not my client. He was an “orphan client”. But I was sure proud of the fact that the concept of “Promises Made, Promises Kept” held true for this man.
Sixty Minutes talked about death claims that were processed cancelling annuities, but ignoring the life insurance. In my experience different departments simply do not communicate without some sort of request, so that did not surprise me.
When my mother died in 2003,she had a brokerage account with my company. I was the trustee of her estate, so responsible for handling all the funds and distribution to my siblings. I dutifully closed out the accounts, submitted her life insurance claims and distributed funds among the 7 children.
A few years later, a cousin called and said they saw my Mom’s name in an unclaimed property list from the state of Illinois. Upon inquiry I found that after we liquidated the stocks, dividends had been paid to the brokerage account, held for the allotted time and then returned to the state. I submitted the claim and used the $383 to take all my siblings to dinner. But frankly, I was embarrassed.
It has not been my experience that life insurers try to avoid pay claims, so this article was upsetting of course. But it also reinforced the importance of a relationship with an agent as well as how important it is for each of us to have a list of our important documents and insurance policies available for our beneficiaries. Be sure your family knows where these are located. Humans have a 100% mortality rate, so it is not a topic that needs to avoided!