by InsInvestigator » Tue Aug 05, 2008 12:32 am
I was recently hired by some teachers in Florida to conduct a thorough review of their life insurance portfolios. After spending several hours examining the documents, I came across something that not only triggered the proverbial red flags but the red glare of skyrockets bursting against a night sky.
Here's the case:
An agent meets with a life insurance policy holder (who works for a school district) in July, 2007. Here the agent takes an application, but does not collect the first month's premium and/or leave a Conditional Receipt. The agent claims that if/when the policy is approved, the premiums will come directly from the district's payroll department.
No word whatsoever is received from the insurance company and the $264 monthly premium begins being withdrawn from the policy holder's paycheck in September, 2007. After making premium payments for the months of Setember and October, the policy holder receives the contract in the mail.
Other than very sloppy customer service, there doesn't appear to be anything wrong with this situation......until I notice that the policy - a binding legal contract - became effective in November 2007! Even though the teacher made premium payments for Sept. and Oct., no benefit would have been paid if he had died.
I feel the anxious hands raising and people screaming "it was done to save the insured's age so that the premium will be lower."
The insured's date of birth is March 9 (the year doesn't matter). The application was taken in July, the premiums began in September, and the policy was issued in November.
Presuming the company (The Texas Life Insurance Company) issues policies based on the nearest age provision, the policy should have been issued on or before September 9, 2007. The premiums, however, began in September and the policy was issued in November. How could this have been done to save age?
Before I refer this one to counsel, I'd like to consider the defense counsel's response. Can I get a little feedback. Have I missed something?
Thanks,
Mark
Here's the case:
An agent meets with a life insurance policy holder (who works for a school district) in July, 2007. Here the agent takes an application, but does not collect the first month's premium and/or leave a Conditional Receipt. The agent claims that if/when the policy is approved, the premiums will come directly from the district's payroll department.
No word whatsoever is received from the insurance company and the $264 monthly premium begins being withdrawn from the policy holder's paycheck in September, 2007. After making premium payments for the months of Setember and October, the policy holder receives the contract in the mail.
Other than very sloppy customer service, there doesn't appear to be anything wrong with this situation......until I notice that the policy - a binding legal contract - became effective in November 2007! Even though the teacher made premium payments for Sept. and Oct., no benefit would have been paid if he had died.
I feel the anxious hands raising and people screaming "it was done to save the insured's age so that the premium will be lower."
The insured's date of birth is March 9 (the year doesn't matter). The application was taken in July, the premiums began in September, and the policy was issued in November.
Presuming the company (The Texas Life Insurance Company) issues policies based on the nearest age provision, the policy should have been issued on or before September 9, 2007. The premiums, however, began in September and the policy was issued in November. How could this have been done to save age?
Before I refer this one to counsel, I'd like to consider the defense counsel's response. Can I get a little feedback. Have I missed something?
Thanks,
Mark
Posted: Tue Aug 05, 2008 10:38 am Post Subject:
Well... Mark... I would call that innocent, harmless, administrative error.
I'm quite confident the insurance company would and will refund any and ALL premiums sent to them in error BY THE TEACHER'S EMPLOYER.
The insurance company isn't taking any money out of anyone's paycheck. The employer is payroll deducting the premiums then sending one check to the company for all employees enrolled in that plan.
Obviously, there is some type of glich in the system or miscommunication between when the payroll deduction should start with the effective date of the contract.
Is this an isolated incident or is this happening on each and every policy written?
Applying in July and not having the policy issued until November (5 months inclusive) leads me to believe there was an inordinate delay in getting some or all medical records and requirements for underwriting.
Further applying in July and having payroll deduction start in September (2 months later) is a reasonable amount of time for most cases to get underwritten and issued. So it apears to me they ARE allowing for that much time between when the application is taken and when payroll deduction begins.
Need more information and how 'bout an update on THIS thread?
Also this caught my eye...
"...the policy holder receives the contract in the mail.
Other than very sloppy customer service, there doesn't appear to be anything wrong with this situation......"
Any agent who does not personally deliver his/her **policies is a moron who will be out of the business in short order as they have just thrown away an opportunity to build trust and confidence with their clients who can refer to them MORE BUSINESS!
**Life, Health, Annuity, Disability, Long Term Care policies. I'm not talking about auto and homeowners policies. So all you P & C agents (Properly and Casually?) don't get defensive.... I'm not talking about you.
Posted: Tue Aug 05, 2008 01:46 pm Post Subject:
Hi Gary (or for that matter anyone..), would you care to tell me why are you leaving them out when you say-
I'm not talking about auto and homeowners policies.
ArindamSenIndiesPosted: Tue Aug 05, 2008 02:45 pm Post Subject:
Hey Gary,
More than anyone, I knew I could count on your input on this one.
When you stated,
I'm quite confident the insurance company would and will refund any and ALL premiums sent to them in error BY THE TEACHER'S EMPLOYER
I knew I had not imagined something here.Based partly on your response, I spoke with a person in the district's Risk Management office just a few minutes ago. The woman assured me that, under no circumstances, would they (the district's payroll department) have withheld any money from the teacher's paychecks unless they were instructed to do so by the insurance company - with the policy holder's approval.
I'm sure both you and I know that the insured would not have approved anything the agent didn't tell them to. A form was thown down on the desk and they just signed it along with everything else - which puts the ball back in the agent's / insurance company's court.
Back in 2000 / 2001, I worked on a number of Unearned Premium cases in which the companies were accused of doing this very thing on a much broader scale. Nothing ever went to trial and the companies settled fairly quickly.
The legal term "Pattern and Practice" jumps out at me here. I think I'll continue to research this one to see if this is an isolated incident or if Texas Life (a Metlife company) does this sort of thing on a regular basis.
If this was just an oversight, I'll get the premiums back and we'll call it a day. If this has happened to a large number of teachers, it'll get very expensive, very quickly.
Thanks again,
Mark
Posted: Wed Aug 06, 2008 09:44 am Post Subject:
The woman assured me that, under no circumstances, would they (the district's payroll department) have withheld any money from the teacher's paychecks unless they were instructed to do so by the insurance company - with the policy holder's approval.
The employee authorized the payroll deduction. Correct?
Just like I wrote above:
"The insurance company isn't taking any money out of anyone's paycheck. The employer is payroll deducting the premiums then sending one check to the company for all employees enrolled in that plan."
I'm sure both you and I know that the insured would not have approved anything the agent didn't tell them to. A form was thown down on the desk and they just signed it along with everything else - which puts the ball back in the agent's / insurance company's court.
Yes, the insurance companies have forms for their forms and those forms change about every six weeks and there is a slightly different form of each form for each and every state the company does business in thanks to the passing of the Paperwork Reduction Act and the computer age.
Side bar: For job security open a printing company and have just one insurance company as a customer.
Yes, the agent would have had the client sign a stack of forms that nobody reads but some insurance company lawyer says if someone ever wants to sue us claiming we didn't have authorization from the employee for payroll deduction HERE'S the form they signed...but didn't read.
Mark if this is an isolated incident... the company will refund the unearned premium. If this is a "Pattern and Practice" ...the company will refund the unearned premium.
If the company DOES NOT or refuses to refund the unearned premium then take them to Court and make them pay.
I'll say it again... applying for coverage in July and having the payroll deduction begin in September is reasonable.
It appears to me the "Pattern and Practice" is to allow two months time for underwriting BEFORE the payroll deduction starts. The instant case wasn't issued until November and the employee was charged premium for the months of Sept. and Oct. in ERROR.
Posted: Wed Aug 06, 2008 06:22 pm Post Subject:
Hey Gary,
In this case, policy owner = school district employee. And, yes, they authorized the deduction. That analogy regarding the forms process was humorously accurate.
I'm working on the premise that this is [probably] an isolated case and, as is, and always has been, my company's policy, I wil give the company the opportunity to do "what's right" and make the policy owner whole.
However, if I find a number of cases that were dealt with similarly or if the company even blinks wrong when asked to refund a couple premiums, things are going to get nasty.
As for the other case you referred to? I don't know what happened. I completed my report and made a couple recommendations. I have yet to hear anything back from them. If I do, I'll send you a message.
Mark
Posted: Mon Aug 25, 2008 07:17 pm Post Subject:
I agree with Gary.
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