Golden..

[Life Hawk]

It is always a business decision.

My point is, the 10% or 20% is roughly what it would cost to investigate and quite often less.

For instance, let's assume the annual premium was $1000 and the company was paying 20% on top and the person died a day before 2 years. So we'll round to $400 in addition to the return of premium. Well, what does one APS cost, maybe $50 to the doctor's office plus a fee to EMSI or whomever chases it down, so at least another $50 to them. What if you need more than one APS, what if it takes EMSI a long time to get it? You can easily spend that $400 on APSes. Plus the time employees spend reviewing it.

Now, you also get to chargeback commission for a rescission, which you may or may not for early death. Assuming it was 80%, then that is another $800. So you save $1,200 if you can deny the claim. But how much of that $1,200 will you spend to determine if you can deny it? How often will you be right? And how much damage will you do to your brand by investigating and denying ROP claims?

I am sure have a algorithm for this that has a geographic specific setting running in some dark closet somewhere that is hooked directly to the CFO's desk top.

 

[Todd King]

It is always a business decision.

My point is, the 10% or 20% is roughly what it would cost to investigate and quite often less.

For instance, let's assume the annual premium was $1000 and the company was paying 20% on top and the person died a day before 2 years. So we'll round to $400 in addition to the return of premium. Well, what does one APS cost, maybe $50 to the doctor's office plus a fee to EMSI or whomever chases it down, so at least another $50 to them. What if you need more than one APS, what if it takes EMSI a long time to get it? You can easily spend that $400 on APSes. Plus the time employees spend reviewing it.

Now, you also get to chargeback commission for a rescission, which you may or may not for early death. Assuming it was 80%, then that is another $800. So you save $1,200 if you can deny the claim. But how much of that $1,200 will you spend to determine if you can deny it? How often will you be right? And how much damage will you do to your brand by investigating and denying ROP claims?

I never said it made economical sense. I would say it's more of a matter of CYA than anything.

 

[VolAgent]

I never said it made economical sense. I would say it's more of a matter of CYA than anything.

CYA for who though? To ensure agent's aren't cleansheeting it? Proper underwriting, monitoring business mix, and monitoring agents would be a better use of resources.

 

[WinoBlues]

What is everyone's experience on contestable claims with SNL's Graded (ROP) FE plan?

 

[Todd King]

CYA for who though? To ensure agent's aren't cleansheeting it? Proper underwriting, monitoring business mix, and monitoring agents would be a better use of resources.

The company of course. The company wouldn't be doing it to cover anyone else but themselves.

We've all seen companies spend money on things we, as agents, think are stupid.

 

[VolAgent]

The company of course. The company wouldn't be doing it to cover anyone else but themselves.

We've all seen companies spend money on things we, as agents, think are stupid.

I get that their motivation is to protect themselves, but what are they CYAing against? What risk do they run if they simply pay all ROP claims without in investigation?

 

[Life Hawk]

I get that their motivation is to protect themselves, but what are they CYAing against? What risk do they run if they simply pay all ROP claims without in investigation?

One thought on that one is they may be trying to weed out bad agent apples. Too many deaths shortly after ROP runs out can be cost prohibitive.

 

[VolAgent]

One thought on that one is they may be trying to weed out bad agent apples. Too many deaths shortly after ROP runs out can be cost prohibitive.

That is a risk whether ROP or level. I know one company exec that is adamant in his hatred of third year deaths. Not that he hates the people or the agent, but he suddenly lost his ability to investigate the claim.

Of course, he is also very vocal in his hatred of recessions. He feels it gives the industry a black eye, which it does.

 

[Life Hawk]

That is a risk whether ROP or level. I know one company exec that is adamant in his hatred of third year deaths. Not that he hates the people or the agent, but he suddenly lost his ability to investigate the claim.

Of course, he is also very vocal in his hatred of recessions. He feels it gives the industry a black eye, which it does.

However, ROP has more adverse risk to the business and that makes it more important that business evaluation is done on a regular basis. If the company is taking too much loss there, they might consider limiting that business sector all together.

I sold Shenandoah... they didn't evaluate their business practice or investments very well.

 

[Todd King]

That is a risk whether ROP or level. I know one company exec that is adamant in his hatred of third year deaths. Not that he hates the people or the agent, but he suddenly lost his ability to investigate the claim.

Of course, he is also very vocal in his hatred of recessions. He feels it gives the industry a black eye, which it does.

In case you didn't know what I was doing, I was only speculating as to why a company might investigate a claim within the first 2 years.

The only other thing I can think of is that by investigating they are just taking the good with the bad and investigating all as a standard.