Insurance for Soldiers in War on Terrorism?
Denny Freidenrich of Laguna Beach says the question came to him in the shower. He owns a consulting business, but he began wondering if he was also a soldier. A soldier, that is, in the war on terrorism declared by President Bush.
More specifically, Freidenrich wondered whether his wife and three kids would collect life insurance were he to die, for example, from smallpox spread by a bioterrorist attack. In past conventional wars, the families of soldiers killed in battle didn’t collect traditional life insurance.
Should it be any different, Freidenrich mused, in a war on terror?
With a lot of talk in recent months about the ongoing threat of bioterrorism -- highlighted by President Bush getting a vaccination -- the question isn’t far-fetched.
It must have been a long shower, because Freidenrich had yet another question. If insurance companies were required to pay off, could the industry survive if massive bioterrorism deaths occurred?
Those questions never would have occurred to me, in the shower or elsewhere, but they are intriguing enough that I made some phone calls.
Mr. Freidenrich, rest easy. You are not a soldier. Should you die in a bioterrorist attack, you wouldn’t be considered a war casualty. Your family likely would collect.
The questions represent a scenario that frighten many in the insurance industry.
I contacted a financial planner for Northwestern Mutual and told him about Freidenrich’s musings.
“We have people behind the lines -- underwriters and in the corporate world -- that are constantly running numbers and ratios that if we had X number of deaths at an average amount of death benefits, how would it affect the company,” he said.
Could the industry sustain the loss of tens of thousands of bioterror victims, each with life insurance policies of six figures? “The answer is that some can and some can’t,” the planner says. “It depends on their ratings and their reserves.”
The model for Freidenrich’s thesis was the attack on the World Trade Center. After the attack, the insurance industry paid on life insurance policies of those killed.
A spokeswoman for the state Insurance Department says bioterrorism on American soil doesn’t constitute an act of war, despite the informal lingo of the “war on terrorism.”
But the precedent exists. “The majority of companies do exclude acts of war” when it comes to paying on life insurance policies, says Nanci Kramer. “That’s why there’s been a huge debate, because the government is calling this a war on terrorism.” However, she says, “a terrorism attack isn’t considered by this department to be an act of war.”
Some companies have raised the issue anew, she says, but the department hasn’t seen a “flood of requests” to broaden the definition of those long-standing war-exclusion clauses in insurance policies. Nor has it approved any, she says.
Companies probably will bite the bullet, because they’ve accepted the difference between actual combat and a proverbial war on terrorism, according to the financial planner I talked to.
“I don’t think there’s any premise to fight it,” he says. That doesn’t mean that some might not raise a challenge, he says. What likely would end the debate, he says, is the obvious distinction between a soldier and a civilian.
This should ease Freidenrich’s mind. Excluding combat soldiers from life insurance made sense, he says, “But the whole playing field has changed. The president has said over and over and over that we’re all going to be soldiers in this long war on terrorism. It’s been proved we’re not invulnerable to attack, so we don’t stand completely protected. We’re all vulnerable.”
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Dana Parsons’ column appears Wednesdays, Fridays and Sundays. He can be reached at (714) 966-7821, at dana.parsons@latimes.com or at The Times’ Orange County edition, 1375 Sunflower Ave., Costa Mesa, CA 92626.
