The issue of whether insurers have a right to not to insure applicants who may travel to places deemed unsafe was aired during a hearing at the fall meeting here of the National Association of Insurance Commissioners, Kansas City, Mo.
The issue is of keen interest to Rep. Debbie Wasserman Schultz, D-Fla., who was turned down for additional insurance by American International Group’s American General unit in Houston after questions about her travel plans. The congresswoman said she would be traveling in her congressional capacity to Poland. Wasserman Schultz was then asked during the application process if she would be traveling to any other foreign country in the future. She replied that while she had no plans at present, in the future she might travel to Israel. On that basis, the company turned down her application in a March 25, 2005, letter.
Travel underwriting was examined in several different contexts: the theoretical arguments for using it; the public policy implications of its use; and the practical effects of employing it when a company decides to approve a policy.
The hearing of the Travel To Foreign Countries (A) Working Group started with a taped message from Wasserman Schultz, who called travel underwriting “a despicable practice.” She said there was no apparent reason for the practice, citing 2004 statistics which showed that 350,000 Americans had traveled to Israel and none had died.
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“Freedom to travel is fundamental to Americans,” she continued. Wasserman Schultz urged state insurance regulators at the NAIC to follow the lead of Florida’s legislature and insurance department and work toward model regulation that would prevent travel underwriting that had no actuarial basis.
Actuaries detailed how they view travel underwriting. Arnold Dicke, representing the American Academy of Actuaries, Washington, explained how risk characteristics are observed and can be associated with expected outcomes to create risk classifications. For instance, he said that instances of high blood pressure can be observed and possibly tied to early death.
The longer the time one spends in a high risk region of the world, the more likely it becomes that there could be a claim, he continued. If premiums don’t reflect that increased risk, Dicke said, the more conceivable it becomes that other policyholders could end up subsidizing claims for those contracts. Dicke said data has to be both credible and relevant.
But North Dakota Insurance Commissioner Jim Poolman, chair of the Life & Annuities “A” committee, asked if companies are actually looking for data.
Dicke responded that experience could be based on actual data or reasonably anticipated data if data collection was insufficient because a particular region was in upheaval.