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Interesting Term Life phone call
Old 04-16-2015, 04:01 PM   #1
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Interesting Term Life phone call

I just got a call from the owners of my 30 year term life policy. I bought it back in '99 from Allstate, but this was some other company that partners with them. I had expected him to try to get me to convert it to Whole Life or something, so I told him right up front I wasn't interested. But then he crossed me up and told me he was advising me to drop the policy, since the odds were against me ever getting paid for it.

I told him that I had bought the policy as this thing called "insurance", intended to replace income in case I died. I don't actually need it now, since we're FI, but it's cheap enough that I have been leaving it in place as a nice buffer of cash for DW if I die before it expires in 2029 (I'll be 74). That would give her plenty of cash to learn how to handle the finances after I'm gone, or move closer to DD and family without having to sell the other house first.

So he was spouting all sorts of statistics at me, like "there's only a 2% chance it will ever pay off" - duh!, that's why it's insurance. "Nobody would ever go to a casino if they only had a 2% chance of winning" - they play the lottery, though, don't they? "It will get too expensive and you'll eventually drop it, so might as well do it now" - 30 years of premiums will only total 8.5% of the policy value. He was jolly the whole time, and kept saying "I bet you didn't expect me to recommend this, did you?"

So, what was that all about? I got the policy back before there were changes in the insurance industry regarding term life, and I think it's pretty damn cheap. Especially for someone with diabetes, high BP, and high cholesterol. I wonder if they got hold of my medical records (didn't have any of those back when I got the policy). Or if it's just a policy with too high a payout for the price? Any ideas from those in the know?
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Old 04-16-2015, 04:08 PM   #2
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Perhaps I'm cynical, but I suspect they are urging you to cancel it because it is in their best interest and not yours.

Something in the actuarial calculations changed, not for their best, and now they want to get out from under that risk.

Unless, of course, one wishes to believe that an insurance company is trying to save you money....
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Old 04-16-2015, 04:20 PM   #3
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Originally Posted by harley View Post
...

So he was spouting all sorts of statistics at me, like "there's only a 2% chance it will ever pay off" - duh!, that's why it's insurance. "Nobody would ever go to a casino if they only had a 2% chance of winning"....I think it's pretty damn cheap. Especially for someone with diabetes, high BP, and high cholesterol. I wonder if they got hold of my medical records (didn't have any of those back when I got the policy). Or if it's just a policy with too high a payout for the price? Any ideas from those in the know?
If I went to the casino, I would bet on the insurance company getting your medical records and I might have a higher than 2 percent chance of winning that bet. Maybe there will be an offer to buy you out of it--but we hope you never collect on the policy!
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Old 04-16-2015, 04:20 PM   #4
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I don't understand what the role is of the person or company that called you. I assume that your premiums are paid to Allstate?

Did he say what they were suggesting that you do other than just drop the policy? I'm trying to figure out what is in it for the caller.

Interesting that he said that there is only a 2% chance it will ever pay off. Not to get morbid, but I would think that the likelihood of a 59 year old surviving to age 74 is a lot less than 98%. As I read this table, it looks to me like there is a 25% chance that a 59 year old male will not live to age 74. (1 - 65,558/86,901) or thereabouts.

Edited to add: it might be that that table I included above was for someone born in 2010, for someone born in 1950 or 1960 it is even higher, more like 45%. I'm sure one of our resident actuaries can clarify, but it is a boatload over 2% no matter how you look at it.

http://www.ssa.gov/oact/NOTES/as120/...les_Tbl_6.html
http://www.ssa.gov/oact/NOTES/as120/...bl_6_1950.html
http://www.ssa.gov/oact/NOTES/as120/...bl_6_1960.html
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Old 04-16-2015, 05:05 PM   #5
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Quote:
Originally Posted by Walt34 View Post
Perhaps I'm cynical, but I suspect they are urging you to cancel it because it is in their best interest and not yours.

Something in the actuarial calculations changed, not for their best, and now they want to get out from under that risk.

Unless, of course, one wishes to believe that an insurance company is trying to save you money....
But he was sooo sincere!

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Originally Posted by pb4uski View Post
I don't understand what the role is of the person or company that called you. I assume that your premiums are paid to Allstate?
Yes, I pay to Allstate, and can look up the history of all my payments. I think they might be like a sub-insurer that owns the policy in partnership with Allstate. He really wasn't clear about that, but since he didn't ask for personal information I didn't worry too much.

Quote:
Did he say what they were suggesting that you do other than just drop the policy? I'm trying to figure out what is in it for the caller.

Interesting that he said that there is only a 2% chance it will ever pay off. Not to get morbid, but I would think that the likelihood of a 59 year old surviving to age 74 is a lot less than 98%. As I read this table, it looks to me like there is a 25% chance that a 59 year old male will not live to age 74. (1 - 65,558/86,901) or thereabouts.

Edited to add: it might be that that table I included above was for someone born in 2010, for someone born in 1950 or 1960 it is even higher, more like 45%. I'm sure one of our resident actuaries can clarify, but it is a boatload over 2% no matter how you look at it.
Yes, I thought sounded bogus too. No way I have a 98% chance of living past 74. I didn't push it too much since I wasn't going to cancel anyway. But this call was definitely in response to something that is currently not in the insurance company's best interest. Otherwise all the credit card companies would be calling people and telling them to cut up their high interest cards and pay in full every month. I wonder if other gentlemen of a certain age with older term life policies are getting these kinds of calls.
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Old 04-16-2015, 05:08 PM   #6
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So, what was that all about?
When you pay a level premium for 30 years, you are over-paying the actuarial value in early years when you are younger and under-paying in later years when you are older. Dropping it would let the insurance company keep the higher premiums. You essentially pay the 30-year price for a 15-year policy. Just price out a 30-year policy and a 15-year policy for the same date of birth on term4sale.com and you will see the difference.
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Old 04-16-2015, 06:08 PM   #7
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That's a good explanation. But it seems like I'd have heard about this happening to other people if it was a common practice. I wonder what caused them to focus on me?
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Old 04-16-2015, 06:19 PM   #8
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Old 04-16-2015, 06:32 PM   #9
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Quote:

Especially for someone with diabetes, high BP, and high cholesterol. I wonder
if they got hold of my medical records (didn't have any of those back when I got
the policy).
When the initial application for LI was completed you most probably signed an authorization for the LI company to investigate your medical records. The MIB (Medical Information Bureau?) could probably use that authorization and get a copy of all of your current medical records if the LI company asked (paid) them to do it.

Maybe just a ploy to get all of those sick folks off the books. Stranger schemes have happened.
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Interesting Term Life phone call
Old 04-16-2015, 06:45 PM   #10
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Interesting Term Life phone call

Quote:
Originally Posted by pb4uski View Post
I don't understand what the role is of the person or company that called you. I assume that your premiums are paid to Allstate?

Did he say what they were suggesting that you do other than just drop the policy? I'm trying to figure out what is in it for the caller.

Interesting that he said that there is only a 2% chance it will ever pay off. Not to get morbid, but I would think that the likelihood of a 59 year old surviving to age 74 is a lot less than 98%. As I read this table, it looks to me like there is a 25% chance that a 59 year old male will not live to age 74. (1 - 65,558/86,901) or thereabouts.

Edited to add: it might be that that table I included above was for someone born in 2010, for someone born in 1950 or 1960 it is even higher, more like 45%. I'm sure one of our resident actuaries can clarify, but it is a boatload over 2% no matter how you look at it.

http://www.ssa.gov/oact/NOTES/as120/...les_Tbl_6.html
http://www.ssa.gov/oact/NOTES/as120/...bl_6_1950.html
http://www.ssa.gov/oact/NOTES/as120/...bl_6_1960.html

Maybe it is one of those "lying by telling the truth" stats....Maybe it is only a 2% chance of dying this year at his current age. Is it possible the premium and all the assumptions built into was formulated during a time period when insurers could assume a higher rate of return on the collected premiums? Is it possible they want out of those to save their profit margin? I bet they are not calling anyone who just bought one this past year!


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Old 04-16-2015, 06:52 PM   #11
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But then he crossed me up and told me he was advising me to drop the policy, since the odds were against me ever getting paid for it.
sounds like they have some guys in the boiler room trying to get people to dump "bad" policies

keep it
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Old 04-16-2015, 09:51 PM   #12
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sounds like they have some guys in the boiler room trying to get people to dump "bad" policies

keep it
Well, truthfully, I have no intention of letting DW collect, so it probably won't hurt the company. But I'm sure the odds of her collecting are better than either a casino or lottery win. I'll be curious to see if others start reporting similar ploys.
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Old 04-17-2015, 08:29 AM   #13
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you should try to sell the policy back to them, for a discount, of course. settle for 45% of the face value of the policy.
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Old 04-17-2015, 09:08 AM   #14
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Yes, I pay to Allstate, and can look up the history of all my payments. I think they might be like a sub-insurer that owns the policy in partnership with Allstate. He really wasn't clear about that, but since he didn't ask for personal information I didn't worry too much.
Here's one possibility: the company calling you bought the business from Allstate, i.e., the new company is the "reinsurer". Allstate is ultimately responsible, but if all goes well (the reinsurer is solvent and conducts its business responsibly), the reinsurer has agreed to pay all claims in return for a large premium paid to them by Allstate.

So now the reinsurer is trying to call people who likely have higher mortality and giving them friendly advice to drop the policy. Maybe they'll try and sell you an annuity! Annuity sellers LOVE people with chronic health issues.
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Old 04-17-2015, 09:56 AM   #15
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Here's one possibility: the company calling you bought the business from Allstate, i.e., the new company is the "reinsurer". Allstate is ultimately responsible, but if all goes well (the reinsurer is solvent and conducts its business responsibly), the reinsurer has agreed to pay all claims in return for a large premium paid to them by Allstate.

So now the reinsurer is trying to call people who likely have higher mortality and giving them friendly advice to drop the policy. Maybe they'll try and sell you an annuity! Annuity sellers LOVE people with chronic health issues.

Quite possibly. Horribly unethical, though. If I were OP, I would lodge a complain with the state insurance department.
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Old 04-17-2015, 09:57 AM   #16
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When you pay a level premium for 30 years, you are over-paying the actuarial value in early years when you are younger and under-paying in later years when you are older. Dropping it would let the insurance company keep the higher premiums. You essentially pay the 30-year price for a 15-year policy. Just price out a 30-year policy and a 15-year policy for the same date of birth on term4sale.com and you will see the difference.
It was unclear from the original post if your term policy was 30 years ART (annually renewable but premiums will increase as you age) or level term, but if it was level term then this makes perfect sense as the ART cost would have been spread out over the 30 year term so you would have been paying more than ART rates in the earlier years of the contract and lower rates in the later years and you're probably near to the crossover point so if they can get you to drop it the insurer comes out ahead.
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Old 04-17-2015, 10:07 AM   #17
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"feels like" an unethical tactic to me
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Old 04-17-2015, 10:14 AM   #18
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I agree, but am torn a bit because if OTOH the OP had come in saying that he had a pre-existing term policy and he was FI and no longer needed the life insurance coverage I suspect that many of us would advise that he drop it.

So while what the caller/company is doing seems a bit suspect it seems to me a bit hypocritical to condemn them.
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Old 04-17-2015, 10:16 AM   #19
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Even if you're "FI", I still think having some LI is a good thing.
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Old 04-17-2015, 10:18 AM   #20
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Why? I don't other than a small, old whole life policy that I keep not for the insurance benefits but because it pays a decent rate of interest so to me it is a fixed income investment. The way I figure it, if we have enough to provide for us if we both live, if I die tomorrow or if DW dies tomorrow what do we need life insurance for? I dropped all of our term coverage years ago.
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