Whatever is being discussed here relates to Life Insurance alone. This discussion is not applicable to other types of Insurances. What happens when an insurance company decides to cheat the public? Can they cheat? Can they evade payments to their policyholders? This article examines of that possibility.
What we call actuarial tables are but death tables. They are carefully prepared based on the actual mortality data. In other words, we can, with almost certainty predict the deaths for any given 1000 lives at any age. There could be objective risk, but that is marginal. During advanced years, say after 80 years, the actuarial predictions of death become a certainty. All we need is an intelligent and sharp mind to understand.
When a life insurer offers a policy to a buyer, the buyer is thoroughly examined medically. We have his blood samples and can conduct any tests. The insurer knows the vital health details of the insured better than the insured himself! With this blood sample and while using the advanced technology the insurer can know every health aspect of the insured – both of past and future. This cutting-edge technology can manipulate life and death. In life insurance industry this technology and its implications are unimaginable and overwhelming.
In a life Insurance contract, the insurer has as much right to cancel the policy as the insured. There are many reasons which can help the insurer to cancel the life insurance cover. I can refer to a few – fraud, suppression of material facts etc. What is a material fact is a matter of interpretation than definition. Forget the incontestability clause! Anything and everything can be construed as material fact!
We have all data. What will happen if we allow young policy holder to pay the yearly premium for 40 to 50 years for an endowment policy, and based on our health data cancel the risk cover for the policy holder when we are almost certain that the policy is likely to become a claim? I am not discussing what will happen to the policy holder. All I can say that through this cutting-edge technology spawns a life insurance enterprise of unimaginable greed which manipulates life and death as the ultimate profit-making tools.
To attract policy holders, offer higher returns/bonuses. It is, after all, ‘Use and File’ environment. To make the agents, brokers and other intermediaries procure more business, offer higher remuneration as the law states that the remuneration can be negotiated. Having received the premiums for a long period, while using the predictions of the death tables cancel the risk cover for high valued policies. If the insurer were to follow the law in letter, the regulator and the courts become impotent. These cancellations will save huge payouts – they could be related to death/disability.
In the times of ‘claims settlement ratio’ playing a great role, timely risk cancellations will boost the settlement Ratios to 100%. The cancellation ratios are never examined either by the regulator or by the public. This results in greater profits, greater bonuses, and greater remuneration to the intermediaries and greater salaries to loyal employees. What is being suggested may sound immoral, but certainly not illegal. I wish to look for such an insurer who wants to profit from this ‘assumption of risk’.
About the Author
Dr. K. Raja Gopal Reddy is a seasoned internationally qualified Insurance professional.
What you are reading here, may not answer all the questions we have, but has the absolute power of asking unsettling questions which increase the interest in the strange world, and show the contradictory wonders lying just below the surface of the commonest things of life. Look at this disturbing but beautiful thought of Friedrich Nietzsche “God is dead. God remains dead. And we have killed him”.
Dr. Reddy can be reached at: raja66gopal@gmail.com
