Med Supps - Post-Claim Investigation

[Northeast Agent]

Yesterday I attended an FMO AEP kickoff/CE seminar. One of the instructors told us that if claims warrant an investigation, the carrier has the right to order medical records during the first two years after the effective date. If the client was not truthful on the application, the policy can be rescinded. This sounds like the two-year contestability clause for life policies.

He used an example that if the ciient tells you they take a particular medication, but they don't know exactly what it's for to make sure you have them clarify it with their doctor.

Is this something you tell all your med supp clients when you're enrolling them, that this can happen?

Thanks

 

[kgmom219]

I don't put it quite that way.

"Just a reminder: There is no sense in lying on the application, they WILL find out because somewhere in the fine print you are giving them access to your medical records. And the LAST thing we want is for your policy to be rescinded because you weren't 100% truthful."

 

[somarco]

No, I do not tell them their policy could be rescinded but I DO tell them to be honest on the app and in the interview. I also tell them the carrier has the ability to see Rx fills for the last 5 years and may refer to them in the underwriting interview.

Finally, I ask if there is anything they MIGHT tell the underwriter that they have not told me.

Since I have been writing Medigap I have only had two applicants declined because of something they told the underwriter that was not disclosed to me.

This, in spite of putting the fear of God in them. I tell them the interview will be recorded and considered part of the application. Pretend you are on the witness stand and Perry Mason is grilling you. Answer the questions as asked. Do not volunteer anything not specifically asked and don't speculate.

I know one general agent that went on a rant about a rescission and put it on a video. Some people think their job is to submit apps without pre-screening. To me that is a complete waste of your time, your client's time and the carriers.

In 40+ years in this business I can count on 1 hand the number of applications that have been rescinded.

 

[VolAgent]

No, I do not tell them their policy could be rescinded but I DO tell them to be honest on the app and in the interview. I also tell them the carrier has the ability to see Rx fills for the last 5 years and may refer to them in the underwriting interview.

Finally, I ask if there is anything they MIGHT tell the underwriter that they have not told me.

Since I have been writing Medigap I have only had two applicants declined because of something they told the underwriter that was not disclosed to me.

This, in spite of putting the fear of God in them. I tell them the interview will be recorded and considered part of the application. Pretend you are on the witness stand and Perry Mason is grilling you. Answer the questions as asked. Do not volunteer anything not specifically asked and don't speculate.

I know one general agent that went on a rant about a rescission and put it on a video. Some people think their job is to submit apps without pre-screening. To me that is a complete waste of your time, your client's time and the carriers.

In 40+ years in this business I can count on 1 hand the number of applications that have been rescinded.

More from the life side. I always tell them it can be undone if they lie.

And I think any company that doesn't do a recorded PHI is missing the boat. Many people think nothing of lying to an agent, but put them on a recorded phone call and they sign like a canary. They will tell about the time they stubbed their toe five years ago.

 

[Residentzombie]

This is the main reason why we have E&O guys, it's not for our errors and omission as much as it is for when an applicant lies and a policy is rescinded and claims paid to providers were rescinded as well. This generally gets the client furious and hires an attorney and you the agent become involved because they will probably try to lie and say that you told them to put that on the application. You will need an attorney to defend yourself if this event evers happens and that is why you only sell A rated AM Best carriers so your E&O can defend you in court.

This rarely happens though, but it can. My FMO told me of an agent who had this happen to him. It is very important to never lie on a Medigap application. Good luck to any agent that ever has to go through that.

 

[adjusterjack]

Yesterday I attended an FMO AEP kickoff/CE seminar. One of the instructors told us that if claims warrant an investigation, the carrier has the right to order medical records during the first two years after the effective date. If the client was not truthful on the application, the policy can be rescinded. This sounds like the two-year contestability clause for life policies.

It's exactly like the two-year contestability clause for life policies.

Back in the 90s I spent quite a few years investigating death and disability claims that occurred during the first two years after issue. Contestability investigators are extremely thorough and are typically licensed private investigators (I was) with insurance training or background.

It doesn't matter what the cause of the claim is. What matters is that ANY misrepresentation on the application that is material to the underwriting of the risk is grounds for denial and rescission.

Materiality has one or more of the following elements (typically upheld by appellate court decisions). Had the insurance company known the truth it would have:

A - Not written the policy.
B - Increased the premium for the policy.
C - Reduced or excluded coverage for the policy.

 

[VolAgent]

This is the main reason why we have E&O guys, it's not for our errors and omission as much as it is for when an applicant lies and a policy is rescinded and claims paid to providers were rescinded as well. This generally gets the client furious and hires an attorney and you the agent become involved because they will probably try to lie and say that you told them to put that on the application. You will need an attorney to defend yourself if this event evers happens and that is why you only sell A rated S&P carriers so your E&O can defend you in court.

You really should read your E&O policy and what it says about A rated carriers. While it is possible, it most likely does not say what you think it does.

 

[DeadSlash]

Many people think nothing of lying to an agent, but put them on a recorded phone call and they sign like a canary. They will tell about the time they stubbed their toe five years ago.

Just an FYI, I was point person on CMS complaints for a call center and I can tell you people lie like a rug, even on the phone!

 

[VolAgent]

Just an FYI, I was point person on CMS complaints for a call center and I can tell you people lie like a rug, even on the phone!

No doubt. But at least a few more come clean when you tell them it is recorded and with a third person.

 

[DeadSlash]

No doubt. But at least a few more come clean when you tell them it is recorded and with a third person.

Absolutely. Agreed, 100%