New Law Prohibits Reduction in Face Value for Old Policies?

dgoldenz · 07-08-2009, 03:02 PM

We looked at reducing the coverage for one of our clients today only to be told that any policy based on the 1980 mortality tables can no longer be reduced in face value/premium if the company who sold the policy is now using 2001 mortality tables and did not specifically put language in the contract allowing for such a reduction (which from what we have been told, no company has). Has anyone heard this? It sounds like it would apply to any term or UL policy.....but I can't seem to find any concrete info on it.

voliosclark · 07-08-2009, 03:23 PM

Wow. That's news to me. What carrier told you that?

dgoldenz · 07-08-2009, 03:42 PM

Protective Life....they said he would have to convert the face amount that he wanted to reduce to a permanent policy, pay a month's worth of premiums, and let it lapse. Seems pretty stupid to me, but could have implications on other companies as well.

R. Paul Aguirre · 07-08-2009, 05:05 PM

I just spoke to Transamerica and they said that the language in the law would allow carriers to decide if they wanted to allow the face reduction. Transamerica is still allowing the 1980 mort based policies to be reduced.

Ami · 07-09-2009, 10:01 AM

Originally Posted by dgoldenz

Protective Life....they said he would have to convert the face amount that he wanted to reduce to a permanent policy, pay a month's worth of premiums, and let it lapse. Seems pretty stupid to me, but could have implications on other companies as well.

and the earlier:

Originally Posted by dgoldenz

We looked at reducing the coverage for one of our clients today only to be told that any policy based on the 1980 mortality tables can no longer be reduced in face value/premium if the company who sold the policy is now using 2001 mortality tables and did not specifically put language in the contract allowing for such a reduction

:

Would they put that in writing? It would be an interesting read indeed. ...and perhaps they may also be kind enough to cite the referenced section in law

dgoldenz · 07-09-2009, 10:05 AM

Originally Posted by Ami

and the earlier:

Would they put that in writing? It would be an interesting read indeed. ...and perhaps they may also be kind enough to cite the referenced section in law

I didn't talk to Protective myself. We were going to run a reduced-face projection for a client and someone from our brokerage facility had called them to get the information, only to be told the above information. I would also be curious to see the actual info in writing myself.

Ami · 07-10-2009, 12:46 AM

Originally Posted by dgoldenz

I didn't talk to Protective myself. We were going to run a reduced-face projection for a client and someone from our brokerage facility had called them to get the information, only to be told the above information. I would also be curious to see the actual info in writing myself.

Maybe someone at Protective is reading this and will step up to the plate to substantiate their (alleged) position.

What on earth would give an insurer the right to read in an ad proferentum, contra emptorum contractual limitation that is not referenced in the contract?

The only two possibilities that comes to mind for the scenario (neither of which are a "new law that prohibits reduction in face value for old policies") are:
A. that the reduction in face amount would cross premium rate banding. For example if the premium for the contract was calculated on the basis of a $500K+ band and the reduction in face amount drops below $500K, then a respective adj. in rate/$K may possibly be justified. or;
B. that the reduction in face amount would drop the face amount below original issue minimum. For example, if the original issue minimum at time of issue was $100K and the reduction would lower the face amount to under $100K.

IMO, even for the above, the contract wording would govern and I don't believe that any state insurance law would permit or require an insurer to read in a contra emptorum provision.

dgoldenz · 07-10-2009, 12:53 AM

I have no idea....hence why I am asking.

Ami · 07-10-2009, 01:16 AM

Originally Posted by dgoldenz

I have no idea....hence why I am asking.

Originally Posted by dgoldenz

I didn't talk to Protective myself. We were going to run a reduced-face projection for a client and someone from our brokerage facility had called them to get the information, only to be told the above information. I would also be curious to see the actual info in writing myself.

Why not ask your brokerage facility to get the info from them in writing? Now that this question has been posed, their response would be quite interesting to read.

dgoldenz · 07-10-2009, 08:09 AM

Originally Posted by Ami

Why not ask your brokerage facility to get the info from them in writing? Now that this question has been posed, their response would be quite interesting to read.

I did, we're waiting on a response.

Ami · 07-10-2009, 12:53 PM

Originally Posted by dgoldenz

I did, we're waiting on a response.

GR8! Pls post it when/if you get the response.