When Agents Lie About Tobacco on the App

[VolAgent]

I don't think I said during the first two years.. I said everything else fell under the contestable provisions. I have had several claims over the years where the face amount was adjusted because the age on the policy did not match what was on the death certificate and subsequently the birth certificate. (when the discrepancy showed up on the DC, they requested the birth cert.)

What I am curious to know is how they handle it if the insured would be too old for the product. Also, what if they find out the insured was younger than stated, do they get it recalculated to be a bigger death benefit?

 

[TDFnCali]

What I am curious to know is how they handle it if the insured would be too old for the product. Also, what if they find out the insured was younger than stated, do they get it recalculated to be a bigger death benefit?

I was told when I was studying for my lic last yr, that would be a YES!!

 

[rousemark]

What I am curious to know is how they handle it if the insured would be too old for the product. Also, what if they find out the insured was younger than stated, do they get it recalculated to be a bigger death benefit?

Yes, they would get the higher benefit.. Have had it happen. I have never had one where the insured would have be outside the issue ages but I would assume they could rescind and return premiums paid. Agent better have his E&O paid..

 

[VolAgent]

Yes, they would get the higher benefit.. Have had it happen. I have never had one where the insured would have be outside the issue ages but I would assume they could rescind and return premiums paid. Agent better have his E&O paid..

Neither an error nor an omission if they give you the wrong age. How many agents look at birth certificates? You write what you are told or get it off the DL.

Also, how could they rescind if outside 2 years? I wonder if they pay as if it at maximum age or use the difference between maximum age and next to maximum age plus rate for maximum age to the rate per thousand to use in calculating the premium?

 

[rousemark]

Neither an error nor an omission if they give you the wrong age. How many agents look at birth certificates? You write what you are told or get it off the DL.

Also, how could they rescind if outside 2 years? I wonder if they pay as if it at maximum age or use the difference between maximum age and next to maximum age plus rate for maximum age to the rate per thousand to use in calculating the premium?

The TN policy states, "The policy benefits payable will be that amount which premiums would have purchased based upon the insured's correct age and sex."

Since if the correct age had been sated, the premium paid would not have purchased any amount, I would assume they pay 0..But I would think they would also have refund the premium. It doesn't matter if they gave you the wrong age, that won't keep the beneficiary from suing claiming you wrote it down wrong.

 

[Guest]

There was a time when it was handled the same as a mistatement of age and was stated as such in the policy. However, now I think it is considered a material misrepresentation.

In Oklahoma we have misrepresentation and fraud.

Smoking is a misrepresentation. After the first two policy years the insurance company can't do anything. If they insured dies in the first two policy years and the death has nothing to do with the smoking (car accident, etc) then they just recalculate the premiums for what a smoker's premium would have been, then deduct the additional premium from the death benefit.

Age is also a misrepresentation. The premiums are recalculated and taken from the death benefit before the death benefit is paid out. There is some grey area in our law and age can be recalculated after the 2 year incontestability period.

Same with suicide. If they off themselves 1yr 364 days after policy was issued, premiums are refunded. 2 years and 1 day, death benefit is paid. I've heard of people committing suicide 2 years and 1 day after a policy was issued.

Fraud is when someone deliberately withheld important facts in order to obtain insurance. An example would be they have AIDS, Pan Cancer, etc. A condition that would ordinarily cause someone to be uninsurable.

I've never heard of a company not paying a DB due to fraud. Not saying it hasn't happened, but it isn't common.

 

[lsalmans]

I assume the carrier would rescind the policy if the records are ordered upon death? Or do they modify the death benefit to accurately reflect the correct rates?

I have been replacing policies written in the past 2 yrs lately where agents have been lying on the app. I told the clients they may be covered, or may not, and it's not worth the chance for many since they dont' have the funds to pay for burial (otherwise they wouldn't need the coverage). Of course I have to charge them more typically to issue the coverage legitimately.

Amazes me what agents will do to sell a policy.

Amazes me what you'll do to sell a policy. I could never replace someones policy due to lying about the tobacco question. Because I just dont think it helps the client.

The tobacco question is a tough one for insurance companies when it comes to claims, because it ask within the past 12 months have you used tobacco. So for example if the client dies in month 18 of the policy. Report comes back lung disease and that he currently smoked, who is to say that 18 months prior when the policy was written up the client had truly stopped smoking for the 12 months prior? and he had restarted up after issue date. Smokers lapse all the time, just like alcoholics. To scare a client into thinking he might not be covered just so I can sell him a policy at 30% higher cost and I can make a sale. No thanks. The tobacco question itself is very subjective. Because there is no documentation of perhaps a start or stop date of the smoker. Its unlike doing an Rx check and a certain pill prescribed during a specific time is grounds for contesting a claim. Or a Dr record stating the client had cancer during a certain time in his life. If Joe Schmo says he had quit smoking from Jan 1st 2011 to Jan 1st 2012, and that claim comes in 18 months later, the insurance company kind of just has to take Joe's word for it. I had an underwriter tell me in his 40 years of working at the company they had never denied a claim due to fraud on the tobacco question.

with all of this being said. It may sound like Im one of those agents that push the boundaries on the tobacco question, I am not. I am just stating why I wouldnt replace a policy due to fraud as it pertains to that particular question. Fraud on chronic things like COPD, liver disease, etc. would be a different story.

 

[jacobtn]

It helps if you actually know what you're posting about, otherwise you just end up looking foolish.

When a client dies in the contestable period, carriers order an aps. In the patients records are dated notes taken by the doctor when questioning their patients. Including their tobacco use. Your silly post about how know one knows if they stopped or not is refuted by this fact.

Got any more wisdom to share?

Amazes me what you'll do to sell a policy. I could never replace someones policy due to lying about the tobacco question. Because I just dont think it helps the client.

The tobacco question is a tough one for insurance companies when it comes to claims, because it ask within the past 12 months have you used tobacco. So for example if the client dies in month 18 of the policy. Report comes back lung disease and that he currently smoked, who is to say that 18 months prior when the policy was written up the client had truly stopped smoking for the 12 months prior? and he had restarted up after issue date. Smokers lapse all the time, just like alcoholics. To scare a client into thinking he might not be covered just so I can sell him a policy at 30% higher cost and I can make a sale. No thanks. The tobacco question itself is very subjective. Because there is no documentation of perhaps a start or stop date of the smoker. Its unlike doing an Rx check and a certain pill prescribed during a specific time is grounds for contesting a claim. Or a Dr record stating the client had cancer during a certain time in his life. If Joe Schmo says he had quit smoking from Jan 1st 2011 to Jan 1st 2012, and that claim comes in 18 months later, the insurance company kind of just has to take Joe's word for it. I had an underwriter tell me in his 40 years of working at the company they had never denied a claim due to fraud on the tobacco question.

with all of this being said. It may sound like Im one of those agents that push the boundaries on the tobacco question, I am not. I am just stating why I wouldnt replace a policy due to fraud as it pertains to that particular question. Fraud on chronic things like COPD, liver disease, etc. would be a different story.

 

[Guest]

When a client dies in the contestable period, carriers order an aps. In the patients records are dated notes taken by the doctor when questioning their patients. Including their tobacco use. Your silly post about how know one knows if they stopped or not is refuted by this fact.

True, but.... Some people lie to their doctors about smoking. Matter of fact I had one recently. He said he didn't smoke, but I know he did. He was a friend of mine and I'd seen him smoke recently when they came over for dinner.

He told me when we filled out the app that he didn't smoke. I told him that he shouldn't lie on the app. He kept telling me that he didn't smoke and he wanted to submit app as non-smoker.

I called the underwriter. She said to just take the app as non-smoker and they would re-rate it when the APS was ordered.

App submitted, APS ordered. App was issued as non-smoker. I called the underwriter and she said that his APS had that he had told the doctors at all of his appointments that he was a non-smoker. I told her I had seen him smoke just a week before the app was submitted. She said they have to go off the APS and the non-smoker issue was going to stand.

Some people go to great lengths to hide their smoking.

 

[Agentguy5]

I don't know! I guess if the question is, "have you used tobacco in the past 12 months?" and I know the client has, if I put down "NO" for him, I am LYING on his app for him... I don't see that helping anyone but myself, in order to make a sale...