by InsInvestigator » Fri Jun 20, 2008 09:07 pm
This story was emailed to me this morning and I thought I'd share it with the community. Unfortunately, this sort of thing happens all the time.
Give me some ideas.
Hi Mr. Colbert!
My name is *****, and I am trying to help my grandparents with an insurance issue. I got your email from the "Underfunded Policies" article I read online. My grandparents are illiterate and easily tricked and I am trying to help them with their life insurance issue but I don't understand it well myself.
I know you are under no obligation to help me but I don't know where to turn and I hope you can just point me in the right direction.
02/28/96, my grandparents purchased a "Flexible premium adjustable life insurance policy" w/ a maturity date of 2/28/31, insured specified amount of $100,000, "planned premium" of $166/month, and a guaranteed interest rate of 4.5%.
My grandparents faithfully made their payments despite their financial difficulties and going through a bankruptcy, they still paid! On 08/2007 after my grandfather had turned 70 years old, the insurance company (who has merged and changed to different companies many times and is currently "ING") contacted them and told them in order to keep the same amount of coverage their premiums would increase to over $400/month and my grandparents cannot even afford their bills at the current rate. They had no choice but to cut the face amount in half to $50,000 with a double premium of $360.
The insurance agent said it is due to the cost of insurance increases. Is this possible? Is this legal? I am sure this was not explained to my grandparents that when they get old and need their life insurance that it would just change on them like this.
I have all of the papers here. Are their any laws governing misrepresentation of these policies. Not to mention my grandfather paid for 10 years of term prior to getting this universal life. He has paid for over 20 years and now the face amount is decreased by half and their premiums doubled. Is there anything that can be done or is this something normal for this kind of policy?
Thank you in advance for you help and concern for this issue. I am trying hard to help them bc as I stated they are illiterate and don't understand too much. Please help me!
Thank you sooo much,
Give me some ideas.
Hi Mr. Colbert!
My name is *****, and I am trying to help my grandparents with an insurance issue. I got your email from the "Underfunded Policies" article I read online. My grandparents are illiterate and easily tricked and I am trying to help them with their life insurance issue but I don't understand it well myself.
I know you are under no obligation to help me but I don't know where to turn and I hope you can just point me in the right direction.
02/28/96, my grandparents purchased a "Flexible premium adjustable life insurance policy" w/ a maturity date of 2/28/31, insured specified amount of $100,000, "planned premium" of $166/month, and a guaranteed interest rate of 4.5%.
My grandparents faithfully made their payments despite their financial difficulties and going through a bankruptcy, they still paid! On 08/2007 after my grandfather had turned 70 years old, the insurance company (who has merged and changed to different companies many times and is currently "ING") contacted them and told them in order to keep the same amount of coverage their premiums would increase to over $400/month and my grandparents cannot even afford their bills at the current rate. They had no choice but to cut the face amount in half to $50,000 with a double premium of $360.
The insurance agent said it is due to the cost of insurance increases. Is this possible? Is this legal? I am sure this was not explained to my grandparents that when they get old and need their life insurance that it would just change on them like this.
I have all of the papers here. Are their any laws governing misrepresentation of these policies. Not to mention my grandfather paid for 10 years of term prior to getting this universal life. He has paid for over 20 years and now the face amount is decreased by half and their premiums doubled. Is there anything that can be done or is this something normal for this kind of policy?
Thank you in advance for you help and concern for this issue. I am trying hard to help them bc as I stated they are illiterate and don't understand too much. Please help me!
Thank you sooo much,
Posted: Sat Jun 21, 2008 10:28 am Post Subject:
Mark, sometimes I feel envious towards you. You certainly have the most exciting job in the world. Thank you for sharing it with us.
You're right in saying that its happening in every moment around us. And I can't express what I'm feeling right now towards this insurance. I guess he has purposely sold an inappropriate policy to this old couple, as you always make more commission on selling whole life plans.
Owing to the fact that the old couple is illiterate I can't blame them completely for not understanding the policy terms. In fact, people consult insurance professionals before getting a policy as its difficult to apprehend the policy verbiage.
I know I'm not of much help to you, but, Mark, please help these old people if anyway you can.
Posted: Sat Jun 21, 2008 10:47 am Post Subject:
If I'm right the concept of flexible premium was evolved to allow the policy holder to tune-in his/her policy coverage with his/her changing needs. It also has the option that the policy holder can choose to stop paying the premium and surrender the policy before the term ends. at this juncture, the cash value of the policy will be given to the policy holder. Some also have the option, that even after the policy owner stop paying the premium the coverage will continue for the life. However, in that case the cash value of the policy will depreciate.
Its important to know what exactly is the nature of the policy that old couple have taken out. If they have the option to surrender the policy, IMO they should, because with age the requirement of coverage declines.
What do you suggest, Mark?
Posted: Tue Jun 24, 2008 04:01 pm Post Subject:
I'll be working on this case very soon. I'll need to gather documents and very likely chat with counsel about a little topic we call Vanishing Premium Fraud.
Posted: Tue Jun 24, 2008 04:18 pm Post Subject:
FromNevada,
If I'm right the concept of flexible premium was evolved to allow the policy holder to tune-in his/her policy coverage with his/her changing needs.
You are absolutely correct.
But what if a policy holder's needs don't change? Let's say they want coverage when the insured's heart stops beating - whenever that may be. And let's say that at the time of sale, the agent promised that if they pay a certain amount every month - through the good times and the bad - that a policy would be in force when the insured died.
The policy owners faithfully make those premium payments every month, sometimes doing without other necessities in order to do so. The policy holder is happy with this arrangement and never exercises their option to modify the policy in any way, shape, or form.
At what point should the insurance company have the right to triple the monthly premium, dramatically reduce the face amount, or lapse the policy?
And what if the agent sold the policy at the minimum premium level because he couldn't get any more money from the insured and never mentioned anything about their having to increase the premium in the future?
Lots of things to consider.
Posted: Wed Jun 25, 2008 08:28 am Post Subject:
I agree Mark, and my point in describing the definition of the policy was to highlight the fact that at later age one doesn't need to review his/her insurance requirements. The flexible premium policy fits best to the needs of young people, who're expecting major changes in their lives, marriage, child birth and so forth.
I'm definitely not supporting what the agent/ insurance company has done. If he had deliberately withheld the information from the old couple, he must be tracked down and penalized for the act accordingly.
However, what's Vanishing Premium Fraud??:roll: Sounds interesting :razz: can you share something more with us about it?
And, thanks for replying to my post.
Posted: Wed Jun 25, 2008 10:36 am Post Subject:
Well, just for fun, I'll play Devil's Advocate....
InsInvestigator wrote:
Give me some ideas.
Mr. Colbert $166 per month is more than enough premium to support a $100,000 policy on a male age 58 standard non-smoker. In fact at age 70 the illustration shows a net cash value of $20,282.
What's that you asked? Where did I come up with age 58?
02/28/96, my grandparents purchased a "Flexible premium adjustable life insurance policy" w/ a maturity date of 2/28/31, insured specified amount of $100,000, "planned premium" of $166/month, and a guaranteed interest rate of 4.5%.
In 1996 (12 years ago) Grandpa was 58. Now in 2008 he's 70.
The first thing that has to be determined is whether or NOT grandpa was a smoker. If he is NOT a smoker then there are "other" facts an circumstances we don't know and need more inforamtion. Such as...BEFORE grandpa filed for bankruptcy did he take out a policy loan that would have destroyed the cash value and NEVER repaid the loan so now his $166 premiums paid were supporting both the internal cost of insurance AND servicing the debt?
Now if grandpa was a smoker...then those numbers are about right. For a male age 58 SMOKER, $166 per month would keep the $100,000 policy in force AT BEST to about age 73.
Also, by the way, EACH AND EVERY YEAR, YEAR AFTER YEAR, FOR 12 YEARS, grandpa was sent an annual statement summerizing the past year's premium, cost of insurance, interest credits, account value and cash surrender value. But of course grandpa is illiterate EXCEPT when it comes to applying for credit.
Okay, let me see if I got this right....grandpa is illiterate but can run up debt to his eyeballs sometime after age 58, has to file bankruptcy to DISCHARGE all his ill gotten illiterate gains, but toughed out making his cash value life insurance premiums since in most ALL states but particularly in Florida, the $$CASH$$ in cash value life insurance is EXEMPT from creditor claims. See Florida statute 222.14
222.14 Exemption of cash surrender value of life insurance policies and annuity contracts from legal process.--The cash surrender values of life insurance policies issued upon the lives of citizens or residents of the state and the proceeds of annuity contracts issued to citizens or residents of the state, upon whatever form, shall not in any case be liable to attachment, garnishment or legal process in favor of any creditor of the person whose life is so insured or of any creditor of the person who is the beneficiary of such annuity contract, unless the insurance policy or annuity contract was effected for the benefit of such creditor.
Now I don't doubt Mark's story....Yes indeed, grandpa, now age 70, probably did get a letter from the insurance company stating that if you want the policy to remain in force you either need to pay more premium or cut the face amount.
Grandpa is also either a smoker or destroyed the cash value of his policy by way of withdrawals or policy loans because $166 per month is more than adaquate premium to support a $100,000 policy on a male age 58 non-smoker back in 1996.
NEED MORE INFORMATION.
Posted: Wed Jun 25, 2008 05:37 pm Post Subject:
Hey Gary; Well, aren't you just a big bundle of love.
Actually, when the policy was issued on the 28th of February, 1996, the insured (hereinafter referred to as Grandpa) was 60. How in the world could I possibly know that? Because I'm an Insurance Fraud Investigator and have received over 50 pages of documents from the insured and the insurance company. Being able to have documents sent to me upon request takes all the guesswork out of the equation.
Grandpa was not a smoker. That most certainly would have complicated his quadruple by-pass and complications thereof. Oh, by the way, when Grandpa was so ill, Grandma also had some very serious health problems undoubtedly due to her husband's ever-worsening condition.
In a rather lengthy phone conversation, their daughter explained that her grandparent's inability to pay the incredibly large medical bills (not all was covered by their insurance) was the reason for the "ill gotten illiterate gains" you spoke of.
You might be correct in your assertion that a premium of $166 will support a $100,000 policy on a 58 year-old, male, non-smoker with no significant health history. And after reviewing the original illustration, I can tell you that $166 will support a similar policy on a 60 year old for around 20 years. After that, he'll need to significantly increase his premium or decrease the policy's face value in order to keep the policy in force.
Now, here's something you didn't consider: Let's say that when the agent met with illiterate, but trusting Grandpa and Grandma, he represented that they could buy a $100,000 policy on Grandpa for only $166 per month and this policy would last forever. However, the agent knew that the policy's target premium was really $228 and the minimum premium was around $157 and some change. Let's also assume the agent in question clearly knew he wasn't going to get $228 per month from Grandpa and Grandma. Let's further assume that when the agent promised them coverage for only $166 per month, he knew that he was short-selling the policy which raises even more questions.
BUT, you'll undoubtedly claim that the agent MUST HAVE instructed them to sign a illustration of future benefits either at the time of sale or when the policy was delivered. That was part of the North Carolina State Insurance Code in 1996. However, because I have a copy of that document, I know that neither the agent nor the insured signed the illustration.
Let's go way out on a limb here and assume that when the agent met with Grandma and Grandpa, he made the sale in any way he could by selling them an underfunded UL policy whose lifespan was further hindered by falling interest rates. The agent put the commission in his pocket and forgot all about the issue until very recently.
Do ya think I can find a law firm in NC to take a case like this?
Stay tuned.
Mark J Colbert
Life Insurance Fraud Investigator
Posted: Wed Jun 25, 2008 07:16 pm Post Subject:
Mark let's NOT assume anything.
See how WRONG I was about grandpa and the reason he had to file for bankruptcy.
Let's just stick to the facts.
Please overcome the FACT the life insurance company would have sent Grandpa an annual statement EACH AND EVERY YEAR with projections into the future showing how long the current premium coupled with the current cost of insurance at the current interest rates the policy would remain in force.
Or how about this for an assumption....???
Let's ASSUME the agent told Grandpa that if interest rates stay about what they were in 1996 the policy will remain in full force and effect till about age 80, (20 years) but if interest rates drop significantly he may have to pay more in premium or reduce his face amount.
Let's make THAT assumption.....deal?
It's just as plausible as your ASSUMPTIONS.
Now you wrote:
And after reviewing the original illustration, I can tell you that $166 will support a similar policy on a 60 year old for around 20 years.
Really?
Then where's the beef?
If you have the ORIGINAL ILLUSTRATION you got from Grandpa it's quite clear to me the policy was designed to provide a level premium and level death benefit for about 20 years then it WOULD lapse.
Are we to believe grandpa NEVER considered he may live to 81?
....and YES Mark, you will be able to find an attorney who will take this case but it won't be on the merits of the case and the CASE WILL NEVER see the inside of a courtrrom because it is less expensive for the insurance company to pay the plaintiff's lawyers off by way of a settlement than it is to WIN in Court.
That's the way these things are.
Posted: Wed Jun 25, 2008 09:52 pm Post Subject:
Hey Gary,
Please overcome the FACT the life insurance company would have sent Grandpa an annual statement EACH AND EVERY YEAR with projections into the future showing how long the current premium coupled with the current cost of insurance at the current interest rates the policy would remain in force.
You are absolutely right. And I suppose Grandpa (illiterate or not) could have picked up one of those annual statements and would have immediately known the status of his policy?
Gary, there was over 30 million people in the Metlife, Prudential, and NY Life lawsuits who could have just picked up their annual statements and recognized the problem. Why didn't they? I personally have no idea. I guess that in the perfect world, everyone should be able to read an annual report.
I know of one Superior Court Judge who sued NY Life for a great deal of money because he couldn't read his. And poor old Larry King; my God, he could have at least paid someone to understand his annual reports. Yet, this poor old man (illiterate or not) is seemingly being chastised for not knowing whether or not his agent misrepresented the terms of his policy?
Let's ASSUME the agent told Grandpa that if interest rates stay about what they were in 1996 the policy will remain in full force and effect till about age 80, (20 years) but if interest rates drop significantly he may have to pay more in premium or reduce his face amount.
That is a very plausible assumtion. Then why did his lawyer call me? If the agent told him the truth and the old man remembered the conversation, they certainly don't need my services. However, knowing the senior marketplace as well as you do, you know that older people are far more likely to "suck ut up" and take their lumps rather than rocking the boat. With this in mind, it obviously took some fortitude for this old guy to stand up for what he believes his family deserves.
I received the original illustration from the company. It had not been left with the policy owner.
....and YES Mark, you will be able to find an attorney who will take this case but it won't be on the merits of the case and the CASE WILL NEVER see the inside of a courtrrom because it is less expensive for the insurance company to pay the plaintiff's lawyers off by way of a settlement than it is to WIN in Court.
You're correct again. The premium for Grandpa's policy won't continue to increase until the system forces him out, he'll die with the peace of mind that he's leaving something to his loved ones, the agent may or may not get a slap on the wrist, and the company will continue to do business the same way with thousands of other seniors who also lack the ability to read their annual reports.
Do I have a great job or what?
Mark
Posted: Thu Jun 26, 2008 10:40 am Post Subject:
Mark...something is WRONG! Something is missing! A key piece of information has not been given!
What is it?
Because $166 per month in premium on a male age 60 STANDARD non-smoker is more than enough premium to run the policy for 30 years.
I've run two illustrations with two of the industry giants and I've been doing my best to sink Grandpa's boat in 12 years, at his current age of 72 and I have failed. I would have to use smoker rates to do that but you stated he was a non-smoker. So I used the worst non-smoker rate class and still can't get the a policy to lapse in 12 years!
Did Grandpa STOP making premium payments for a period of time and/or did Grandpa take out a policy loan that was NEVER repaid and/or was Grandpa a sub-standard risk at age 60?
I will grant you $166 per month IS NOT enough premium to run a $100,000 policy to age 100 or to age 120 on a male 60 STANDARD non-smoker rate class but it certainly should have been MORE THAN ENOUGH to run the policy for 12 years and beyond.
NEED MORE INFORMATION.
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