How to Choose the Right Life Insurance Policy

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How to Choose the Right Life Insurance Policy - Sales of life insurance may have risen sharply over the past year but millions of people are still not adequately protected because they find the process of choosing and buying cover complex and time-consuming.

The long term outlook for automobile insurance in Canada

Automobile Insurance

In a recent online article, Canadian Underwriter magazine asked the question, Is the sun setting on auto insurance in Canada? In my view, it may be late afternoon for the automobile insurance market, but I think it will be a while yet before the sun fully sets on this line of business.

Although automobile insurance premiums represent a smaller share of total insurance premiums today than they did twenty years ago, they still account for more than half of the insurance market. While there may continue to be an erosion in auto insurance’s share of the Canadian insurance market, this line of business will likely continue to be a major part of the market for some time yet. If anything has the potential, though, to knock automobile insurance off its perch as the dominant line of business for the Canadian insurance industry, it is the technology of autonomous cars.

According to figures supplied by the Office of the Superintendent of Financial Institutions, automobile insurance accounted for 61% of the market back in 1999. Last year, automobile insurance accounted for 53% of the market. As noted by Joel Baker, President and CEO of MSA Research, it isn’t that the automobile market is shrinking. In fact, the sector is continuing to grow. But the market for all other lines is growing faster. Since 1999, total automobile insurance premiums have grown by 22% (from $14.3 billion to $17.4 billion) whereas insurance premiums for all other lines have shot up by over 67% (from $9.2 billion to $15.4 billion).

As with any line of business, the size of the automobile insurance market is governed by the total amount paid in losses. Claims costs take the lion’s share of any premium dollar. In setting an insurance premium, whether for automobile insurance or any other type of insurance, an insurer will start with the expected claims cost and will then add a loading to cover its selling and administrative expenses and – for stock companies at least – a profit factor as well.

Starting with automobile claims costs, there are ways to reduce these costs. Such measures include tort reform, changes to the Accident Benefits schedule, efforts to reduce distracted driving and efforts to combat insurance fraud. Selling and administrative expenses can also be reduced by various means, including the use of block chain technology. None of these measures, however, will cause the total automobile insurance sector to fade into oblivion.

Self-driving cars, on the other hand, may have the potential to virtually eliminate automobile accidents. Among other things, these cars don’t daydream, they don’t experience road rage, they don’t talk on the phone, they don’t drink and drive, they don’t stunt drive, and they don’t get into arguments with their passengers. All they do is focus on driving. And they do this using some very sophisticated technology. This is not to say self-driving cars will never get into an accident. Accidents have already happened. But I think it’s fair to say self-driving cars are much better at driving than us mere mortals. As self-driving cars take over the roads, the frequency and severity of automobile accidents could fall to near zero.

When self-driving cars become a significant presence on Canadian roads, the need for, and the cost of, automobile insurance will drop considerably and may even one day disappear altogether. For insurers, this will bring about significant downsizing but, given the historically poor underwriting results of this line of business, it may cause the valuation of insurance companies to rise. As for brokers, there will also be significant downsizing but, unlike insurers, there could also be a degradation in business valuations.

Having said all that, until the day comes that self-driving cars are commonplace, my guess is that automobile insurance will continue to be a major part of the insurance marketplace.

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What to Do With an Expensive Life Insurance Policy

If your money runs out long before the month does, you might be thinking about dropping your life insurance coverage. Eliminating premiums, particularly on pricey whole and universal life policies, can free up money in your budget for more pressing needs.

But don't let that policy lapse just yet. According to Marv Feldman, CEO and president of Life Happens, a nonprofit group that provides educational resources about the insurance industry, many people don't realize that they may have ways to maintain their coverage or even make money off a plan they can't afford.

From downsizing the death benefit to selling your coverage for a profit, here's what you should know about your life insurance options.

Decide if you need life insurance. Before taking any action, experts say you should start by evaluating your need for life insurance.

"Life insurance is probably the most overbought product out there in my opinion," says Michael McCloskey, an associate professor at Temple University's Fox School of Business who teaches about insurance, risk and health care. Life insurance isn't unnecessary, but many people buy it without understanding how it fits into their financial big picture, McCloskey says.

For instance, retirees may not need life insurance if there are no children in the house or there's no mortgage to pay off. Single people may also be able to do without a large life insurance death benefit. In both cases, a smaller burial policy may be sufficient.

If you have enough money in the bank to cover final expenses and meet other financial goals, you may be safe canceling a policy. Otherwise, there are several strategies to keep coverage, depending on the type of plan you have.

Limited options with term policies. A term life insurance policy offers coverage for a set period of years. If someone holding a term policy dies during that period of time, his or her beneficiaries receive the death benefit. If the terms ends and the policyholder is still alive, no benefits are paid. Virtually all insurance carriers, including MetLife, Liberty Mutual and State Farm, offer term policies.

The simplicity of term life insurance means there aren't a lot of options for someone who has a policy they can no longer afford. "There's not a ton of wiggle room," McCloskey says. The only way to reduce premiums on a term policy is to lower the death benefit or find group coverage that may have lower costs. "You may look to see if your employer has a cheaper option available," McCloskey says.

Reducing the death benefit isn't something that can be done on an existing policy though, says Hal Rogers, president of advisory firm Gold Tree Financial in Jacksonville, Florida. Instead, a person needs to apply for a new policy with a lower benefit.

Changes in age and health may mean there is no guarantee someone will be approved for a new life insurance policy, and if they are, the premiums may not represent a significant savings. Given that, it is important to have a new policy in place prior to canceling an old term life plan.

Use cash value for permanent plans. Whole life and universal life insurance policies offer more options if you can't afford premiums.

"With a whole life policy, you [could] take a loan from the cash value to pay the premiums," Feldman says. Loans against the cash value of a plan don't have to be paid back, but any outstanding balance will be deducted from the death benefit upon a policyholder's passing. If a policy pays dividends, those could also be used to reduce or eliminate premium payments.

Buying a new policy with a lower death benefit is also a possibility, though, as with term plans, people shouldn't assume they'll be eligible for a new coverage. Secure a new plan before giving up the old one.

Surrendering a policy can also be a good option if you're in greater need of cash than life insurance. When a plan is surrendered, "they [insurance companies] write you a check for the cash value," Rogers says. That money can then be used to purchase a paid-up life insurance policy or pay for other family needs.

Consider selling your insurance. Life settlements have been around for more than 20 years, but many people still don't know about them. They allow people to sell their life insurance policy to companies known as life settlement providers. States regulate the practice with most requiring providers be licensed.

The provider pays a lump sum that is usually more than any cash value in the policy but less value than the death benefit. After payment is made, the provider becomes responsible for paying future premiums, and the company receives the death benefit when the seller passes away.

Terminally ill patients in need of cash for medical treatments or other expenses were originally those who pursued life settlements. "That's really where the industry started," says Bryan Freeman, president of Atlanta-based Habersham Funding LLC, a life settlement provider. However, life settlement companies today will buy term, whole, universal and even group life insurance from those who aren't diagnosed with a life-threatening illness.

There is no standard rate for life settlement payments. "It's all over the board," Freeman says. A 40-year-old in perfect health probably won't even qualify for a settlement offer, but a senior with some ailments may find their coverage is more valuable. "If life expectancy is very short, the valuation is much higher," Freeman says.

Feldman says there is some division within the life insurance industry about settlements. While some see them as a benefit to policyholders, others worry they take advantage of people in vulnerable situations. Feldman says the decision to pursue a life settlement ultimately depends upon a person's particular circumstances and preferences. "Some people are uncomfortable knowing someone else has a policy on them," he says.

Ask for guidance. Since life insurance can be complex, experts urge people to seek professional assistance in evaluating their options. That's especially true when considering a life settlement. "That is a very complicated market and if you don't know what you're doing, you can be taken advantage of hugely," Rogers says.

An insurance professional can also help consumers understand their options with whole life and universal life policies. For instance, there may be tax implications, and a lump sum payout of the cash value could affect Medicaid eligibility.

Feldman recommends looking for someone who belongs to a professional organization that has a code for ethics for members. He notes Life Happens maintains a database of agents on its website.

A trusted professional can help you fully understand the advantages and disadvantages of all your options. If you have life insurance, you may be sitting on a valuable asset. Before you let a policy lapse, explore your options to maintain your coverage or turn it into cash.

4 Risks consumers need to know about DNA testing kit results and buying life insurance

Buying Life Insurance

• Consumer and privacy experts have warned that direct-to-consumer DNA testing kits like those offered by Google-backed 23andMe can lead to a host of unintended consequences.
• There are federal and state laws to protect genetic information from health insurers and life insurers.
• Consumers may actually have an advantage over life insurers in the short-term as the new consumer health technology allows them to learn more about personal genetic risks.
• However, the laws can be interpreted in multiple ways, and life insurance companies are prepared to push their side of the debate to make sure policies and premiums reflect actual mortality risk.

Life insurance is all about risk — the insurer assesses a policy based on likelihood of mortality, and the consumer is charged a premium rate based on complex actuarial tables. But the boom in direct-to-consumer DNA testing kits such as those offered by Google-backed 23andMe, can now give consumers a peek into a future that life insurers can't see.

Direct-to-consumer DNA kits, commonly used to track ancestry roots, increasingly allow individuals to assess their potential health risks by predicting genetic illnesses. DNA kit assessments like the "Genetic Health Report" that 23andMe has been providing are on the rise since the Food and Drug Administration approved the Google-backed company to assess risk for 10 genetic diseases. The report can recognize genetic variants associated with an increased risk of developing certain health conditions, including Late-Onset Alzheimer's or Parkinson's. It also provides a "Carrier Status" report, which determines if a customer carries a genetic variant for a health condition. The variant typically means the customer does not have the genetic disease, but shows they are prone to passing it down to their children.

For life insurers, a sector that banks on its ability to manage risk-taking when it comes to health, this new DNA era could mean an information disadvantage versus the consumer. The risk is theoretical at this point, but enough of a concern that it led bond rating agency Moody's Investor Service to warn in a recent report that DNA testing could become a credit negative rating for life insurers.

Many consumers and privacy watchdogs have expressed concerns about the use of DNA test results to deny health insurance, but there has been less attention paid to the potential influence this new consumer health technology will have over the life insurance policy market. Here are four key concepts that consumers should understand.

1. State laws protecting genetic information vary

Most life insurers are restricted by state laws from using genetic information in the underwriting process, which protect genetic results as a form of private property. That legal precedent is the foundation for Moody's argument that consumers have an advantage by being valued less risky than reality. But it is trickier than that. In fact, life insurers say that taking a direct-to-consumer genetic test may give them the upper hand.

Life insurers insist they can still request genetic information and retract an individual's contract if they hide test results, leading to debate over related state laws. Currently, 17 states have laws that restrict life insurers from using genetic information in the underwriting process, according to Moody's. Even in states not protected by such laws, life insurers do not explicitly ask for genetic information right now, Moody's said.

These laws go beyond the federal Genetic Information Nondiscrimination Act (GINA) which prevents genetic discrimination in the health insurance sector. The laws act similarly to GINA, which prohibits health insurers from requesting, requiring, or using genetic information to make decisions about eligibility for health insurance, premium rates, coverage terms.

Life insurers say such laws can be interpreted in different ways. The American Council of Life Insurers (ACLI) said there are no state laws barring an insurer from using existing results, and only two states prohibit requiring an applicant to take a genetic test for life insurance. If an individual does not give up their genetic information, the life insurer has "the right to void a policy," the ACLI said.

"Both the applicant and the insurer must 'put their cards on the table,'" the ACLI said in a statement to CNBC. Hiding genetic information would be contributing to what it deems adverse selection, according to the ACLI, and could affect the stability of a customer's contract later on.

"Life insurers rely on the honesty of applicants. The validity of a policy depends upon the full disclosure of all material information," ACLI said.

In addition, if a disease is serious, patients should be talking to medical experts. This means their conditions will be available on medical records and can be used by life insurers, according to the ACLI.

For policymakers, the purpose of the anti-genetic discrimination laws is clear: Genetic information is private, and using it to determine how much an individual should pay for insurance is a breach of privacy, and will lead to vast inequity in the insurance policy market.

'We all have pre-existing conditions,'' Brian McCall, a Republican insurance executive who wrote the law in Texas barring genetic discrimination, told The New York Times. ''We've just never been able to test for them with any accuracy. The purpose of insurance is to spread risk. But with genetic tests, insurance companies can virtually eliminate the guesswork in underwriting. They can seek out people who are genetically pure, creating a ghetto of the uninsured, because they will know who is likely to get a particular disease at a particular age.''

The ACLI says McCall's view is inaccurate and any insurer seeking only to cover the "genetically pure" would quickly be out of business. "A genetic test is only a marker of a future risk, and is certainly more insurable (e.g. less risk) than known disease," the ACLI said. Even so, insurers routinely offer policies to people with histories of cancer, diabetes, or heart disease.

2. Even favorable life insurance can come with a catch

Customers will most likely receive the better end of a deal if they are aware of genetic risks, according to experts. But certain packages can be more worth the deal than others.

With life insurance usually split into anywhere from 10 to 20 pricing tiers, customers are grouped in a particular class based on their level of risk. If a consumer buys a policy without disclosing genetic predispositions, consumers will most likely be valued as less risky than they should be, granting them slightly better premiums, said actuary and fee-only insurance advisor Scott Witt.

Customers should choose "term insurance" for the most prominent advantage, Witt said. Term insurance covers a fixed rate of payments for a limited period of time, potentially fitting for patients who are dealing with a deadline. But term insurance is also not a "sure thing," Witt said.

"Just because somebody has a predisposition toward something, there's no certainty they would die during the term insurance period," Witt said.

3. There may be more important life decisions to make

Witt said that merely learning about a genetic risk is "not necessarily going to be the deal breaker" in the type of insurance package a consumer chooses. And there may be other major life and financial decisions that offer more long-term security than trying to time the life insurance market.

If someone suddenly realizes they have no chance of making it past age 90, they might focus on other decisions, like investing their money or spending time with family, Witt said. They should also consider medical advances, which are occurring at an accelerating rate. If they splurge on insurance, but a medical breakthrough is made, they may regret their choice, Witt said.

"It's absolutely something in the short-term the consumer has some advantage," said Mark Cortazzo, senior partner of MACRO Consulting Group. But he added that it is unclear to him that a majority of consumers would take advantage of it. "If you have a breast cancer marker, I think my reaction to that is to have a radical mastectomy to save my life before it is to get life insurance. Utility is going to drive that — how valuable is your time, your money, your privacy?"

4. Life insurers may retaliate

If there are signs that genetic testing is working at odds with actuarial tables, life insurance companies can always respond by adjusting policies and rates.

"Insurance companies are very smart, it's always a cat and mouse game with these things," Cortazzo said. "There's ways to adjust for that."

Witt agreed. "If people need insurance, they need insurance," Witt said. "It's possible [DNA kits] could help tilt the odds in favor of the consumer in some instances. But in the grand scheme of things, it will even out. Insurance companies will adjust their rates accordingly and there will just be a redistribution."

Redistributions could mean higher premiums. A potential trade-off could be raising prices across-the-board but asking consumers to provide genetic information in return for a discount, Cortazzo said. Companies may also tell states if they want to see low rates, they should write laws to allow access to genetic information, he said.

The ACLI stated that hiding genetic information could add to everyone's cost if they "game the system" to their advantage and at the disadvantage of other policyholders.

"The 'pool' of insured policyholders eventually becomes financially unsound because the insurer is not collecting enough premiums to pay the higher rate of claims," the ACLI said.

The ACLI also points out that there are precedents for insurance prices going down and policies becoming more widely available as a result of policy holders taking more control over their health. Critics used to complain that it was unfair for life insurers to use applicants' cholesterol level in the underwriting process. Now, cholesterol is widely accepted as a health measurement and it has helped drive down the cost of insurance. People now typically take drugs to control their cholesterol. "Similarly, genetic information will in the future encourage people to take steps to prevent illness, or catch a disease early so that it can be treated," the ACLI said.

Most importantly, consumers should be aware of the private information they are giving up if they choose to go down this road.

"Understand what you are getting and giving up," Cortazzo said. "They're knowingly deliberate choices. It's when you don't know and don't understand, and this info is being gathered, that it becomes an issue."

US National Insurance Advisory AAIS Introduces IBM Blockchain-Based Reporting Tool

US National Insurance

Privately held insurance advisory American Association of Insurance Services (AAIS) has introduced its blockchain-based insurance database and reporting tool, according to an announcement video posted August 15.

The platform, dubbed Insurance Data Link (openIDL), is based on IBM's enterprise blockchain solution, using Hyperledger Fabric. The platform intends to reduce “burdensome” statistical reporting processes, as well as cut costs and data processing time for insurance carriers.

According to a report accompanying the announcement, openIDL is operating the “first secure, open blockchain platform that enables the efficient and permissioned-based collection of statistical data on behalf of insurance carriers, regulators and other participating contributors.”

The blockchain-powered insurance solution aims to provide “timely and accurate information,” as well as enable regulators to acquire “holistic and dynamic reporting.”

According to the AAIS’ announcement, the openIDL platform includes an automated data uploading system, smart contracts to enable automatic transactions’ execution, and access to insurance data on “permissioned basis in near-real time” instead of time-consuming data calls.

The openIDL solution is also reportedly targeting carriers and organization of “every size and configuration,” such as blockchain consortia, platforms and applications.

In April 2018, global insurance brokerage and risk management firm Marsh announced the first commercial blockchain solution for proof of insurance to move their system “from complicated and manual to streamlined and transparent.”

In late 2017, Cointelegraph reported that a group of fourteen European insurance providers partnered with Deloitte and other companies to provide a simple system for insurers to comply with the Hamon Law, with requires insurers provide simple transfers for clients who want to change companies during the first year.

Insurance Firm pays N412m claims, restrategises life business

Niger Insurance Plc posted a gross premium of N8.59 billion in 2017, against N5.96 billion recorded in 2016, the Chairman of the company, Yusuf Abubakar, has disclosed.At the company’s yearly general meeting in Lagos, he stressed that the premium moved by 44 per cent, which amounted to N2.6 billion, noting that the underwriting profit closed at N1.1 billion from N888.9 million in 2016.

Abubakar added that total assets also grew by one per cent from N22.5 billion in 2016 to N22.8 billion, while the insurance contract liability rose to N10.02 billion from N8.86 billion in 2016, and shareholders’ funds now stand at N7.84 billion.He posited that the underwriting company, in compliance with regulatory requirements, had resolved to dispose investments in real estate. He pointed out that due to cost control measures put in place, the management expense reduced to about nine per cent, from N2.75 billion in 2016 to N2.51 billion in 2017.

The company’s boss explained that the board has reached an advanced stage on discussions with investors, who will now raise the working capital and bring technical expertise to the company.The Coordinator Emeritus, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, urged the board and management of the company to work assiduously to sustain the feat recorded in the past, adding that as one of the leading lights in the insurance industry, the company should never allow smaller ones to take its position. Shareholders’ activist, Nona Awo, urged the firm to innovate to withstand competition and called for fresh hands on the board to take it to lofty heights.

Source: Guardian Newspaper

How To Get Life Insurance If You're Disabled

Life insurance is intended to replace lost income, pay off debt and leave an inheritance after the death of a loved one. But for Americans with disabilities, getting this important financial protection can present a challenge.

"I have a 21-year-old son who can't get life insurance," says Lisa Bamburg, co-owner of Insurance Advantage and LMA Financial Services in Jacksonville, Arkansas. Her son is by all appearances healthy, but a diagnosis of autism at age 4 has left him uninsurable. People with severe physical or cognitive impairments like dementia may find they are also ineligible for coverage.

"If you don't work at all, that could potentially knock you out as well," says Shervin Eftekhari, president of Zander Insurance Group in Nashville, Tennessee. That's because insurers are looking for clues to gauge the overall health of an applicant and how a disability affects that person's mortality. Even if someone is not completely honest on his or her application, prescription records and employment history could hint at a pre-existing condition.

Still, those with disabilities shouldn't assume life insurance is out of reach. Most companies handle applications on a case-by-case basis. People can improve their chances of approval by taking steps to improve their health and proactively address concerns insurers may have. However, even if an application is denied, those with disabilities may be able to find coverage through employer benefits or guaranteed issue plans.

Keep reading to learn more about how insurers make coverage decisions and how to buy life insurance if your application is denied.

Remember: A disability doesn't equate to life insurance denial. Life insurance applications go through an underwriting process in which they are reviewed for details such as a person's health background, medications and family history. In addition to looking at written medical records, insurers also schedule a medical exam that may include testing blood and urine, as well as checking health indicators such as blood pressure, pulse and weight.

"An underwriter has several options when approving an applicant for life insurance," says Jeff Benowitz, a financial representative with Certified Financial Services in Paramus, New Jersey, an agency of The Guardian Life Insurance Company of America. The application can be approved as applied for, denied or approved with certain stipulations, like a waiting period before claims can be made. Some riders, such as a waiver of premiums in the event of a disability, may not be offered as well.

Once an application is approved, it is assigned a rate class. Those with excellent health are eligible for lower premiums, while those who have health concerns may be approved for coverage but pay higher rates.

While underwriters review medical data, there are limits to what they can request when reviewing an application. For instance, an underwriter cannot make an applicant with a disability go through more medical testing than an applicant who does not have a disability, Benowitz says.

Improve your odds of securing an affordable rate. Fortunately, there are steps you can take to boost your chances of receiving approval for life insurance.

Benowitz says the first step is requesting a copy of his or her medical records. "Sometimes an applicant will be surprised by what a physician has written down on their chart," he says. "It is always better to be able to explain a note in a medical chart with the application as opposed to after the underwriter has received the records independently."

When it comes to applying, Eftekhari suggests finding an agent or broker who works with multiple insurance companies and can compare quotes from multiple providers to find the best rate. An agent may also be able to best identify which firm is most likely to grant coverage. Brokers can submit an anonymous preliminary inquiry on behalf of clients to gauge whether a company would be receptive to approving a full application. To find someone experienced with that process, look for an insurer who specializes in high-risk approvals. A trusted financial advisor, friend or relative may be able to make a recommendation.

People with disabilities can also take steps to ensure their condition is well-managed. Eftekhari uses the example of someone diagnosed with post-traumatic stress disorder.

"[If a] person is going to follow-up appointments and working in a job, that person will [likely] get coverage at a good rate," he says.

Consider your options for guaranteed coverage. Those who are unable to get life insurance through the traditional underwriting process may still be able to get coverage. Many workplaces offer life insurance as part of a compensation package, and these group plans typically do not require any medical questions or examination. The only snag: Coverage often ends when a person's employment ends.

Some companies also sell what is known as guaranteed issue life insurance. These plans have no underwriting requirements and are available even to those with significant health concerns or who are at an advanced age. However, premiums can be significantly higher than what someone would pay elsewhere for the same level of coverage. Despite the cost, these plans are often used by those in need of burial insurance to cover their financial expenses. Though guaranteed to be issued, consumers need to be aware of any waiting periods or other restrictions on these plans that could limit the ability to make a claim.

Before going that route, Bamburg recommends people make sure they can't get more affordable life insurance elsewhere. "Call an insurance agent and explore that possibility before you say you can't get it," she says.