A friend of mine recently wrote to me about a situation that I think should scare many people.
She, like many folks, receives a small life insurance policy from her workplace for something like $25,000 in case of accidental death. A lot of companies offer such a thing as a standard part of their benefits package, and it generally is expected to cover the deceased’s funeral and any outstanding bills they may have.
She sought to increase this amount, as most people optionally can do, to $50,000, to ensure there’d be no outstanding expenses, and to leave something behind to her nephews whom she loves and adores. For most people, this is easily done. You simply fill out a form and agree to pay the $5 premium/month, and boom, it’s done. No physical, nothing more complicated than that.
Imagine her surprise, then, when she received a letter from the life insurance company that rejected her life insurance coverage increase because of her treatment for depression. Depression. One of the most commonly diagnosed and treatment mental disorders in America today, affecting nearly 1 in 10 Americans throughout our lifetime. That means that for every 10 people who read this entry today, one of you will be rejected for life insurance simply because you sought out treatment for this disorder that drug companies try and convince everyone is purely biological in nature and cause.
My friend has no history of acting out, no suicide ideation or behaviors, no hospitalizations for her depression, nothing of the sort. She has had a clean bill of health her entire life and has had no hospitalizations for any health problem or accident. Yet a life insurance company wants nothing to do with her.
Something is very wrong with this picture.
(4 votes, average: 3 out of 5)
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2 Responses to “Life Insurance Discrimination” (Pingbacks/trackbacks not shown below)
Life Insurance Canada Guy at 4:29 pm on
October 3rd, 2004
(speaking as someone who spent a number of years in jail, sorry, I mean in a pricing department of an insurance company):
The idea of discriminition in insurance is actually a finely walked line. The folks that price this stuff - actuaries - are well aware of this, and there is legislation to guard against some of the socially unacceptable discriminations. However, you’ll note that women get cheaper life insurance than men. That’s sex discrimination. Young male drivers pay more for car insurance. Both of these acceptable discriminations by insurance companies. Pricing based upon race however (even though I would speculate it’s possible to show that life expectancy differs measurably by race) would make for a pretty good class action suit against the insurer - there have actually been class actions suits over this exact issue.
Unfortunately for your friend, something like depression is measurable as is probably the effect it has on life expectancy for people who have had depression as a group.
Probably the best way for your friend to get around this is to try and ‘remove themselves from the group’ of people who have had depression. The best way to do this would be to apply for an individual policy. There’s a couple of reasons why this might be successful. First with an individual policy you will be individually underwritten. It’s possible that a good agent can show the insurer that ’specifically’ your friend doesn’t have any of the indicators they are worried about, despite the previous depression. (an example of this is that I have a non-rated life insurance policy even though I’m kind of a chubby fella. While I should have been rated for weight the underwriter decided that my build didn’t make me quite as fat as the scales indicated - I’ve got broad shoulders). In addition applying for an individual policy with a company is likely to take you to an entirely different area of a life insurance company - one with different sets of rules, etc. And - on top of all that there are some companies that won’t look at certain things while other companies are happy to take that ‘risk’. It’s possible there are insurance companies who have underwriting departments that are comfortable with insuring people like your friend. But the best way to find all that is to buy an individual policy (plus an individual policy is a bit more flexible than a group policy).
URL drop ahead:
if your friend wants to start looking for a life insurance shopping site, there are prices at an american site here: www.americanterm.com, which is going to actually show more companies’ prices than most of the big name shopping sites 
.
Debby at 3:55 pm on
December 9th, 2004
First, I gotta say this doesn’t scare me. The concept behind life insurance is based on spreading a person’s risk among a group of people. It’s only fair to group similar risks together. If someone has a risk that sets them apart from that particular group, then one can argue it’s not fair for them to shoulder her extra risk.
Second, perhaps your friend can speak with the company representative for their insurance plan? If the agent goes to bat for her, and he explains to the underwriter the specifics of her situation, then maybe the underwriter will okay the increase. Perhaps, this is simply a case where she just needs to speak up.
Third, if that doesn’t work out, let her know there are options — and perhaps she’ll even find a better plan for her dollar. The price and the benefit depend upon how experienced and knowledgeable the broker is. To get an idea of what’s out there, here are some actual quotes (these are real life people):
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(speaking as someone who spent a number of years in jail, sorry, I mean in a pricing department of an insurance company):
The idea of discriminition in insurance is actually a finely walked line. The folks that price this stuff - actuaries - are well aware of this, and there is legislation to guard against some of the socially unacceptable discriminations. However, you’ll note that women get cheaper life insurance than men. That’s sex discrimination. Young male drivers pay more for car insurance. Both of these acceptable discriminations by insurance companies. Pricing based upon race however (even though I would speculate it’s possible to show that life expectancy differs measurably by race) would make for a pretty good class action suit against the insurer - there have actually been class actions suits over this exact issue.
Unfortunately for your friend, something like depression is measurable as is probably the effect it has on life expectancy for people who have had depression as a group.
Probably the best way for your friend to get around this is to try and ‘remove themselves from the group’ of people who have had depression. The best way to do this would be to apply for an individual policy. There’s a couple of reasons why this might be successful. First with an individual policy you will be individually underwritten. It’s possible that a good agent can show the insurer that ’specifically’ your friend doesn’t have any of the indicators they are worried about, despite the previous depression. (an example of this is that I have a non-rated life insurance policy even though I’m kind of a chubby fella. While I should have been rated for weight the underwriter decided that my build didn’t make me quite as fat as the scales indicated - I’ve got broad shoulders). In addition applying for an individual policy with a company is likely to take you to an entirely different area of a life insurance company - one with different sets of rules, etc. And - on top of all that there are some companies that won’t look at certain things while other companies are happy to take that ‘risk’. It’s possible there are insurance companies who have underwriting departments that are comfortable with insuring people like your friend. But the best way to find all that is to buy an individual policy (plus an individual policy is a bit more flexible than a group policy).
URL drop ahead:
if your friend wants to start looking for a life insurance shopping site, there are prices at an american site here: www.americanterm.com, which is going to actually show more companies’ prices than most of the big name shopping sites .
First, I gotta say this doesn’t scare me. The concept behind life insurance is based on spreading a person’s risk among a group of people. It’s only fair to group similar risks together. If someone has a risk that sets them apart from that particular group, then one can argue it’s not fair for them to shoulder her extra risk.
Second, perhaps your friend can speak with the company representative for their insurance plan? If the agent goes to bat for her, and he explains to the underwriter the specifics of her situation, then maybe the underwriter will okay the increase. Perhaps, this is simply a case where she just needs to speak up.
Third, if that doesn’t work out, let her know there are options — and perhaps she’ll even find a better plan for her dollar. The price and the benefit depend upon how experienced and knowledgeable the broker is. To get an idea of what’s out there, here are some actual quotes (these are real life people):
