Selling
Health Insurance:
How well do you sleep at night?
by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department
It is hard to pick up a trade journal without some story involving health insurance and the increasing costs. Dealing with the increasing cost of this coverage is prompting many customers to call their agent and inquire about a cheaper plan. The concern with a cheaper plan is that it may not be as good as their current one. There are a number of areas where the plans could differ.
The Strength Test
| One major area to consider is the financial strength of the carrier. While more carriers are being rated by A.M. Best than in years past, there are still a significant number that are not rated or are given an "NR" rating due to insufficient data, insufficient size, operating experience, etc. An agent should exercise extreme caution in doing business with a carrier where it is not clear that the carrier is in good financial condition. At a minimum, financials should be obtained. If you can't get a financial, that should be a very clear first sign that there is potential trouble on the horizon. As you will note by the following E&O claim, you need to be alert for other signs as well: |
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This claim involved an agency that specialized in life and health insurance. The agent was contacted by an acquaintance that introduced him to a general agent who had a program that provided health insurance for individuals and their families. The plan was described as being affiliated with a recognized network of physicians. The processing of the policies and claims was through an out-of-state, third party administrator. After making a number of placements, the administrator advised the agency that due to a claim backlog, they were not accepting additional applications. The agent then became aware of clients experiencing unpaid medical bills and he advised his clients to move their health insurance elsewhere. He was later contacted by a law firm advising him of pending litigation. |
| Agents need to be aware that there are individuals and organizations taking advantage of the current financial pressures on the public to seek alternative, low cost sources for health insurance. These offerings may initially accept and pay claims but cease operations after a short period of time. These exposures can be reduced by placement with known entities and by following the warning that if it sounds too good to be true, it probably is. |
Not All Coverages Are Created Equal
| In addition to the concerns involving the financial strength, you have the issue of policy forms. While there have been state efforts to achieve more standardization of health insurance, there is no doubt that most plans have a degree of uniqueness to them. Each carrier may treat specific ailments in a different manner. Thus, you need to exercise caution when moving a customer from one company to another, and ensure that the coverages are similar. If they are not, bring the differences to the customer's attention. If you are not sure what the differences are, get someone to do the analysis for you. Another option and probably the better one — don't sell the coverage at all. Many agents leave a booklet with the customer that explains the coverages. While this is definitely a good approach, many customers are relying on you for your expertise. |
Caution is the Best Medicine
| As you can see, even for an agency that specializes in this coverage, problems can arise. If you just plan on dabbling in this arena, my suggestion is — "Don't." Contract with an agency that knows this business to handle the health insurance for your personal and business clients. You may give up some commission but you may also find that you can sleep better at night. |
Communiqué is published for our agent-customers for informational purposes only and is not intended to be, nor should it be relied upon as legal advice. Legal questions should be directed to your legal advisor.