Saying ‘No’ to More Life Insurance

Question: From reading your columns, I realize that people usually come to you when they have exhausted their patience or avenues of appeal. Perhaps you could address this issue: Is there any state law or regulation that covers the top age at which people will be approached to buy more straight-life insurance?

The enclosed correspondence outlines the situation experienced by my neighbor, C.A., who with his late wife were also good friends of mine. In essence, C.A. was approached by representatives of Prudential Insurance Co. about his “insurance needs.” C.A. told the two of them that he had no need for more insurance, but because they persisted, he invited them for a visit.

They kept him for an hour and a half and told him that Prudential was unhappy with him because they were paying him more in dividends (on three older policies) than they were receiving in premiums. Finally, he agreed to a new $10,000 policy because he was assured that “it would cost him nothing.” A medical technician checked out his health, but then he began receiving notices asking him to pay $638.10 for the new policy. Yearly premiums are $1,250.50 until March 12, 2008, when it will increase to $1,661.30.

C.A. is 76 years old, with no children and has no dependents. And he is convinced that Prudential is “looting” his three senior policies to pay for the new $10,000 one. I feel that this smacks more of intimidation than salesmanship. I am retired from the Social Security Administration, and I am well aware of seniors being sold multiple insurance policies. Is there no self-policing within the industry regarding the top age at which companies will stop attempting to sell life insurance?--L.B.


Answer: Everyone should be blessed with someone like you as a neighbor--pursuing this matter with everyone from the California Department of Insurance to the local office of Prudential to the chief executive officer of the company in Newark, N.J. You’ve made more waves than the U.S.S. Lexington hitting open water.

Indeed, according to David Langenbacher, the Los Angeles-based chief of the Department of Insurance’s underwriting services bureau, the department has already begun an investigation of C.A.'s case, and Prudential has already been asked for an explanation.

From a purely practical standpoint, however, there isn’t any state law or regulation that prohibits any insurance company from approaching anyone, of any age, and selling him or her a product.

And in certain instances, Langenbacher says, there can be a valid reason for selling a 76-year-old man a new life insurance policy: if there’s a large estate involved, for example, and the need for liquidity in that estate is advisable.

But, in C.A.'s case, as you point out in a footnote, what we have is a retired painter with anything but a large estate. And, certainly, with no visible need for any more life insurance.

In such cases, Langenbacher adds, “we review the case and try to determine if there is any value to it for the consumer. More often than not, though, nothing can be proved or disproved because documentation doesn’t exist--there’s no paper trail, and what we end up with is an account of what the company’s representative said and what the consumer said and they’re usually contradictory.”

If it therefore comes to hardball, he continues, “our choices are limited. We can suggest that they see an attorney. But, for a 76-year-old person on a fixed income, it isn’t very practical, and so the insurance company wins by default.”

However, it isn’t as bleak as it sounds--especially with a company of Prudential’s size and standing in the industry.

Someone of Authority

“They’ve got an awful lot of agents,” Langenbacher adds, “and the company doesn’t have a choke-chain on them. So, after we’ve investigated, we try to conclude whether a well-informed, intelligent person would have made such a buying decision. If the answer is ‘No,’ then we call it into question with somebody of authority in the company and make every effort to convince them that, in the interest of fairness, they reconsider.

“Can’t we restore this person’s position with the company to what it was before?”

“We take the position that any solution that doesn’t leave the policyholder in as good or better position than he was in before isn’t a good solution.”

Prudential, through consumer affairs assistant Laurie Webber, concedes that the company has been contacted by the Department of Insurance and that the “matter is under review and investigation.”

Subsequently, however, Department of Insurance underwriting officer Mike Brison assured us that the C.A. matter has gone considerably beyond “review and investigation” and that the affair has been “completely resolved. Prudential has agreed to a total return of the total premiums paid, either directly to C.A. or through complete reinstatement of his old policies--it’s as if the new policy had never been written.”

So, all’s well that ends well.