Does Insurer Have Any Recourse After Issuing Policy Incorrectly?

[slacker]

I'm working with a client who is nearing the end of her 15 year term policy. The policy was issued with a tobacco rate and a rating for weight. She quit smoking 5 years ago and the carrier changed her to a NT rate but her weight has continued to increase. She now wants to convert a portion of her coverage and has been quoted by a rep for the carrier at a "standard NT" rate, saying he sees no rating on the current policy. Needless to say, the rate is quite low considering her current weight, and the question is if they issue the conversion at the lower rate and she then she dies, if the carrier realizes their mistake, do they have any recourse or would they have to honor the policy as issued?

 

[VolAgent]

That is the beauty of conversion. The company may only contest due to misrepresentation for 2 years after the statement. Once that time has elapsed, they may no longer contest the policy for that reason. So as long as the conversion application does not ask her weight or consider it for eligibility or rate, then no her current weight does not matter.

Just like a reinstatement only opens up being able to contest for 2 years ONLY on the statements made as part of the reinstatement.

I would do the conversion app for her if it was me.

 

[rousemark]

Perhaps it was issued with a temporary rating.

 

[slacker]

That is the beauty of conversion. The company may only contest due to misrepresentation for 2 years after the statement. Once that time has elapsed, they may no longer contest the policy for that reason. So as long as the conversion application does not ask her weight or consider it for eligibility or rate, then no her current weight does not matter.

Just like a reinstatement only opens up being able to contest for 2 years ONLY on the statements made as part of the reinstatement.

I would do the conversion app for her if it was me.

Thank you Vol, that's what I'm thinking. She just got verbal quote, no paperwork yet

----------

Perhaps it was issued with a temporary rating.

She was 5'1" and 230lbs at application and has grown larger since

 

[goillini52]

Thank you Vol, that's what I'm thinking. She just got verbal quote, no paperwork yet

----------



She was 5'1" and 230lbs at application and has grown larger since

She ought to be about full grown by now.

 

[VolAgent]

Thank you Vol, that's what I'm thinking. She just got verbal quote, no paperwork yet

----------



She was 5'1" and 230lbs at application and has grown larger since

You need to see the policy or at least the amendment removing the tobacco rating. It should show standard or not and if any table rating. They may have messed up and left off the table rating or flat extra when removing the tobacco. If so, that is on the company.

 

[MGBAgency]

I'm working with a client who is nearing the end of her 15 year term policy. The policy was issued with a tobacco rate and a rating for weight. She quit smoking 5 years ago and the carrier changed her to a NT rate but her weight has continued to increase. She now wants to convert a portion of her coverage and has been quoted by a rep for the carrier at a "standard NT" rate, saying he sees no rating on the current policy. Needless to say, the rate is quite low considering her current weight, and the question is if they issue the conversion at the lower rate and she then she dies, if the carrier realizes their mistake, do they have any recourse or would they have to honor the policy as issued?[/QUOT

You're gambling with your errors and omissions for what exactly? This is why agents will go extinct. You know there are material changes that you need to update the carrier on. And you're what, asking if it's okay to cheat the insurance company? A concealment of information like that could get your license pulled. Notify the insurance company.

 

[slacker]

I'm working with a client who is nearing the end of her 15 year term policy. The policy was issued with a tobacco rate and a rating for weight. She quit smoking 5 years ago and the carrier changed her to a NT rate but her weight has continued to increase. She now wants to convert a portion of her coverage and has been quoted by a rep for the carrier at a "standard NT" rate, saying he sees no rating on the current policy. Needless to say, the rate is quite low considering her current weight, and the question is if they issue the conversion at the lower rate and she then she dies, if the carrier realizes their mistake, do they have any recourse or would they have to honor the policy as issued?[/QUOT

You're gambling with your errors and omissions for what exactly? This is why agents will go extinct. You know there are material changes that you need to update the carrier on. And you're what, asking if it's okay to cheat the insurance company? A concealment of information like that could get your license pulled. Notify the insurance company.

Let me clarify here MGB. I met this lady through a referral from a captive P&C agent asking me if I would help this lady. The only paperwork she has is the policy, originally issued with 2 "extra charges", no details for what they were for. As the application showed her to be a smoker and her ht/wt listed as 5'1"/230lbs I assume those were the reasons for the extra charges. During our call to the carrier, I explained that the policy was issued tobacco and that she had called 4-5 years ago after quitting and the tobacco rating was dropped. The rep first quoted her a rate for "best possible", I asked if had the policy in front of him, to which he stumbled around for a bit then replied "let me redo this". He then came back with a quote for "standard non-tobacco", which I felt was still way too low. I then asked him again if he had the policy in front of him to which he replied "yes" but then asked me at what class the policy shows as being issued. I told him it states "rated" and asked if he shows a rating and he said he didn't see any. He then said he would check with his manager and then email quotes and paperwork to her. That was last Thursday an she has yet to receive anything. Once again, I told him the policy was issued "rated" and showed 2 extra charges. This is a major carrier, not a small fraternal. I want to do what's best for her and all this may be moot if they finally do send her quotes based on how they have rated her previously. She has also had a few health complications since policy inception, are you suggesting I should inform them of her whole health history on a conversion?

 

[pfg1]

Bottom line, she gets to convert to whatever they say she can - at whatever the rates are for her. The deal with conversion is just that... the client doesn't have to prove insurability again, nor provide current health history. Whatever the carrier provides is what they go with. If for some reason you thought your client was better health wise, then by all means submit for new underwriting. Doesn't sound like that is the case here.

 

[VolAgent]

You're gambling with your errors and omissions for what exactly? This is why agents will go extinct. You know there are material changes that you need to update the carrier on. And you're what, asking if it's okay to cheat the insurance company? A concealment of information like that could get your license pulled. Notify the insurance company.

Do you know how conversion works? I get the feeling you don't have a clue.

Excluding a few companies that ask questions at conversion, conversion is a no questions asked deal. You get to keep whatever your current rate class is and simply pay based upon current age.

If the company screwed up and dropped the table ratings when they changed her from tobacco to non-tobacco rating, that is on them. Whatever their system shows as her current rate class is what the converted policy will be issued as.

Ask me no questions and I'll tell you no lies.