An Odd Story

Today, my associate editor Mike Stanley passed along to me a column from the New York Times magazine entitled “Whole Life Premium,” in which the author tells of how, upon successfully getting an error on his personal auto policy fixed, is pitched on buying some life insurance. Long story short, upon learning that the author is in fact a relatively young guy in decent health with no family to provide for, the rep at the unnamed insurance company tut-tuts the author. “Life insurance is meant to preserve an estate, not to create one,” the rep says, and upon deciding that the author doesn’t have much to insure except for funeral costs, the rep basically kills the sale. She suggests that the author get in touch when his conditions change.

This column reminds me of an old adage my college friends attending Washington & Lee’s journalism school would jokingly say: “Never let the truth get in the way of a good story.” I strongly suspect this column is liberally seasoned with balderdash with a generous side helping of poppycock. Why? From conversations I have had with industry folks, I can actually see a company deciding not to sell a prospect a small policy since the commission on them tends to be low. But in the case of this story, the sale is over the phone, and by the author’s account, it is nearly complete by the time the rep pulls the plug, which makes little sense to me. (If I am wrong, dear reader, please let me know, and I’ll gladly stand corrected.)

But there is more to it than just that. Honestly, I cannot see a life insurer declining to sell a product to a customer based on how the customer intends to use that product. That the rep in this story felt the author would misuse the money from his eventual life claim strikes me as a projection of negative reputation upon the industry by an already skeptical writer for a publication that, let’s be frank here, has had a few problems with the truth in years past.

Now, perhaps I am wrong here. Maybe there are plenty of life insurers who would take issue with a policyholder insuring himself for a handsome sum when he really had no prospective widows or orphans to take care of. But it seems to be that the manner in which life insurance is priced and sold, it should not matter to the insurer one bit how the death claim money is actually spent. It is meant, ideally, for funeral expenses, for college expenses of the kids, to pay off a house, etc. But there are plenty of times when the money goes to other things. It is not as if life insurers run an audit on how you actually spend the money, correct? And why should the insurer even care? Life insurance is priced by a pretty successful bit of actuarial science, all things considered, that care not for the morality of the transaction. The success of the industry is based on the financial success of its products. That much is clear.

There are other details in this article that bother me, like the fact that the insurance company in the supposed transaction is never actually mentioned by name. It’s almost as if the author just said he was speaking with “the insurance company,” like we might say we speak with “the phone company” or “the electric company.” And in so doing, the author homogenizes an entire industry of hundreds of companies down into a single stereotype that stands in for any and all life insurers everywhere, big or little, mutual or stock, successful or unsuccessful, saintly or bastardly.

For the Times magazine crowd, this is enough. The article is on the last page of the book in a space reserved for its lighter essays meant to evoke an emotional response rather than a reasoned one. And the aim to this article, it would seem, was to turn the notion of underwriting on its head. We all know that some people simply cannot get life insurance. My late father could not because of some grievous health problems he had early on, and it would have been almost impossible for any life insurer to try to underwrite the guy accurately. And while that is unfortunate, in the end you can’t really blame a life insurer for feeling that it cannot make a profit off of a prospective client. It is a business, after all.