Life insurance companies and their agents often recite this principle in sales conferences:
Life insurance is sold - not bought.
This means that you did not likely call up an insurance company looking for life insurance. Your agent likely found you and told you why the policy was good for you.
Your life insurance was likely sold to you by your trusted life insurance agent. You may not have trusted a big financial institution when it came to life insurance. You turned to a person you knew and trusted - the agent. You probably thought of your agent as a professional. You may have had a long relationship with your agent.
But what really was the agent’s relationship with you? Should you trust the agent to act in your best interest? Consider these problems when dealing with life insurance agents:
· The first problem is that they are only compensated when they make a sale. In short, they must sell policies to earn a living. This is the same conflict of interest that consumers face when shopping at a car lot. Consumers know more about cars than life insurance. And cars are less complicated than the life insurance contract. Lawyers, doctors, dentists – they are all paid for the review of your case and their opinion. Not for selling you on a transaction or service.
· The second problem in trusting a life insurance agent is that they do not require any major education about life insurance in general. Even less about the specific policy that they recommend to you. Compare this to the education of doctors, dentists, and lawyers. Insurance policies are very complicated. Choosing among insurance alternatives can be as demanding as a legal or surgical issue.
· The third problem is that there is only minimal supervision. In effect, no one is watching to make sure that the agent is doing the right thing for you as opposed to simply selling a policy to make money. The life insurance company is supposed to supervise the agent. But the company does not know you. It only knows what the agent reports to it. And the company wants to make the sale, too.
In Ontario, there is no obligation that a life insurance agent sell you something that is in your best interest. Lawyers, doctors and dentists have the obligation to put your interest first. But not life agents, at least not in Ontario.
Should you trust what a life insurance agent is selling? There is no way of knowing. You cannot rely on the licensing requirements or the integrity of the credentials/initials that most life insurance agents have trailing their name on a business card. The initials may have been obtained by completing short courses, often taken online or by correspondence. The basic course that all agents must complete is only that - basic.
This does not mean that your policy is unsuitable. Or that your agent is unprofessional. Some agents have a university education and have completed an arduous program of training very much like that undergone by lawyers, doctors and dentists. It just means that you face a “buyer beware” situation when dealing with your agent and with the insurance company. You should approach life insurance with that attitude. Until the insurance regulators demand and enforce professional standards, you have little choice.
You should take great care to get all promises made by the agent in writing and in plain language. You need a record of what the agent promised you. A sales presentation may be exciting but if it seems too good to be true, it likely is not what it seems. Life insurance is all about protecting against tragedy. Protection. Peace of mind. It is best to understand who’s side the insurance salesperson is on before buying. Afterwards may be too late. Then your only way of your family getting its due is through lawyers.
Take great care when a life insurance agent completes paperwork on your behalf. Applications and disclosures must be complete and accurate. Often, life agents are careless with paperwork. You may only discover the mistake when your policy expires worthless, after it is too late to fix any problems. Your family may discover the mistake at the time the life insurer denies their claim for the death benefit, when it is certainly too late to fix things. And agents are not really supervised to get things right.
You should take care to understand all questions asked in health and lifestyle questionnaires. You should give full answers, especially when you are not sure what is asked. Better to write too much than too little. Don’t trust your agent if you are told not to report something. There is an unfortunate practice among life insurance companies to accept policies where the questions have obviously been answered incompletely or inaccurately. They may deny the claims much later when the applicant passes away. That’s unfair, but no one is stopping them from this practice.
If you have a claim for a death benefit denied by a life insurance company, contact the experienced lawyers of the Financial Loss Advisory Group of MBC Law Professional Corp. for more information, visit www.lifeclaimdenied.ca.
Harold Geller is a founding member of the FLAG, the Financial Loss Advisory Group of MBC Law Professional Corporation. He is often consulted by regulators and consumers organization about life insurance industry issues.