Modify The Survival Requirement
To The Editor:
When I was medical director at a direct writing company, the claims administrators occasionally turned to me for an opinion about life expectancy in accelerated death benefit claims. The contract defined eligibility as “life expectancy less than 1 year.” But life expectancy is poorly suited to consideration of terminal illness. Life expectancy refers to the average duration of survival for a population. The variation around that average, or the range of possible survival, is sometimes very large. I struggled in the same ways that Glen Bobo describes in his March 29 article.
Average life expectancy is not what the public or physicians mean by terminal illness. Terminal illness relates more to the maximal possible survival rather than the average. In most diseases, medical literature and personal anecdotes include exceptional cases with long survival. There is also the problem that the claim may arrive during treatment. If it is known that a few cases will respond very successfully to treatment, I sometimes advised that the company defer the claim until we had established the outcome of treatment.
Eventually, I developed my own approach, to rely on the kind of statistic that Mr. Bobo cites in the first paragraph of his article: “a disease with a survival rate of only 9% after a year.” I reasoned that the intent of accelerated death benefit is to pay under circumstances that nearly all people would die within the 1-year “life expectancy” in the policy definition. Data on average survival is often difficult to obtain and distorted by unusual outcomes. By contrast, actuarial survival statistics are easier to find. They also enable attending physicians to finesse the conflict that surrounds the preservation of therapeutic hope in dismal circumstances.
The industry would be well served to modify the survival requirement for accelerated death benefits in our contracts. We could achieve the implicit goal of the benefit and avoid the conflicts and anguish depicted in the article. The definition of a qualified claim should be conditions with > 90% mortality (< 10% survival) at 1 year.
The views expressed are those of the author, not Gen Re LifeHealth.
Thomas Ashley, MD
VP and Chief Medical Director
Gen Re LifeHealth
Put ADB In All Policies
To The Editor:
Accelerated death benefits can be much better than they are, and Mr. Bobos practical suggestions are a step in the right direction. But he only scratches the surface.
The larger problems: (a) many policies simply do not have an accelerated death benefits feature; (b) almost all are very restrictive (12-month lifespan); (c) qualification criteria are daunting (up to 3 medical certifications); and sadly (d) some companies, down to the customer service personnel, resist or even obstruct ADB claims.
Since the late 90s our Settlement Brokerage has seen instances where the company initially stated ADB was not in the policy (when it was), and then delayed the claimuntil an appropriately threatening letter from the owners attorney hit the carriers desk. This is depressing, but not that surprising, given the reality that carriers dislike the Viatical and Life Settlement industry, in large measure because a settlement always leads to a death claim. Its our feeling that carriers especially detest ADB because its an actual cash payout, right now.
We counsel our applicants to review their policy and, if theres the slimmest chance of ADB qualification, recommend that they submit claim paperwork. Since their agents usually are missing in action or not up to speed, we help them understand their policy as best that can be done. Meanwhile, we pursue a settlement. With few exceptions, those who receive ADB do not sell the balance of their policy. Thats not a problem for us: We do whats right and sleep well.
The larger point is that settlements offer a valid option for owners, and we predict to them: “The numbers will tell you what to do.” Many times, we end up providing the cash that otherwise might have come from the carriers, if only their customer concern matched their advertising.
I got started in the business in 1965, and this article by Mr. Bobo marks the first time Ive felt strongly enough about what Ive read to make a response. Thanks, Mr. Bobo: Keep up the good work. And if you have any clout, see if you can get the carriers to put ADB in all policies (including second-to-die), extend ADB out to 24 months to coincide with HIPAA, and be more forthcoming with claims. Theres plenty of settlement business out there for everybody. Lets help those who are closest to death.
Morris G. Heins
American Life Settlements, LLC
Reproduced from National Underwriter Edition, May 7, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.