When traveling abroad for business or pleasure,
an individual’s intended destination could eventually influence whether
or not they’re approved for a life insurance
policy. Among the most controversial of travel destinations is Israel,
and it has stirred a lively debate among state and federal lawmakers.
While
safety issues surrounding foreign travel is nothing new, the topic took
on a new perspective in early 2005 when U.S. Rep. Debbie Wasserman
Schultz (D-Fla.) learned firsthand about how life insurance companies
can deny coverage based on past or future travel plans.
A mother of three small children, Wasserman Schultz recently sought to add coverage to her life insurance policy.
When the congresswoman applied to American General Life, an operating
unit of New York-based American International Group (AIG), she checked
a box indicating she “might” travel to Israel sometime in the
future—although she had no immediate plans to do so. To her surprise,
AIG declined the application because of her “potential travel plans.”
The company indicated it would reconsider the decision when Wasserman
Schultz returned from Israel (although she had not traveled there), and
only if there were no future plans to visit again.
AIG’s
decision to reject coverage is one that life insurance companies are
making more often as part of their standard risk assessment of
applicants. In this case, companies consider the amount of risk they
would absorb when individuals travel to foreign countries. By accessing
the U.S. State Department’s “travel warnings” list,
insurers can identify countries that should be avoided due to civil
unrest, crime rates, or other volatile conditions that deem them unsafe
for Americans. The Department’s list presently contains 26
destinations--such as Iraq, Iran, Afghanistan, Haiti, and the
Philippines. Israel, specifically the West Bank and Gaza, was most
recently added to the list in June 2005.
AIG’s decision
to deny additional coverage is one that Wasserman Schultz didn’t accept
easily. The congresswoman argued that because U.S. citizens are not
restricted from visiting Israel, which is considered as “lawful travel”
by the State Department, there should be no denial of life coverage.
The representative also cited statistics showing that the U.S. has a
higher intentional death rate than some countries with issued travel
warnings. Compared to Israel’s intentional death rate, which is 11 per
100,000, the United States’ rate is 17 per 100,000.
“The
freedom to travel is a part of our way of life and if we start denying
legal travel abroad, then we give in to Osama Bin Laden, Hezbollah, and
other terrorists who wish to change our way of life,” Wasserman Schultz
remarked earlier this year when announcing sponsorship of the bill.
Fueled
by these sentiments , the U.S. Rep. in early 2005 sponsored legislation
called the Life Insurance Fairness for Travelers Act, or LIFT Act (H.R.
3639). Attached as an amendment to the Terrorism Risk Insurance
Revision Act of 2005, or TRIA, which protects the industry from
catastrophic losses following an act of terrorism, the LIFT Act was
geared to prevent insurers who benefited from TRIA from denying life
insurance coverage based on international travel plans. The bill stated
that insurers would be able to implement risk-based pricing as long as
the pricing was based on “good faith actuarial analysis.”
But
LIFT is no longer being considered at the national level. After meeting
staunch resistance in the Senate, Wasserman Schultz’ legislation
stalled, and TRIA was ratified in January 2006 minus the amendment. Out
of the national spotlight, the measure is now being debated at the
state level, in Florida.
The
state version of LIFT was introduced to the Florida legislature in
October 2005 by Rep. Eleanor Sobel (D-Hollywood). Sobel indicated that
life insurers that deny coverage based on travel would have sweeping,
long-term affects on individuals because “once you get denied life
insurance from one company, it’s hard to obtain it from another,” Sobel
indicates.
Seeking guidance from a similar bill introduced
in Maryland--one of five states to successfully enact legislation
similar to the federal bill--Sobel drafted the Freedom to Travel Bill
(H-299), which is accompanied by a companion piece of legislation
introduced in the Florida Senate. “I believe that the subject of our
bill is probably more suitable as a state law, rather than a federal
law, since insurance is regulated by the states,” Sen. David Aronberg,
the sponsor of the senate bill, said.
As freedom to travel laws are considered by the states, life insurance companies
are weighing in about how such a proposal would greatly restrict their
ability to accurately assess risk and control loss costs.
According
to The American Council of Life Insurers, LIFT "undermines and limits
the ability of an insurer to make a risk assessment based on sound
actuarial principles, and we are opposed to it,” declares Whit Cornman,
a spokesperson for the ACLI. “And, it comes back to the Unfair Trade
Practices that govern each state. We support that in letter and in
spirit.”
Echoing those beliefs, Frank Keating, president
and CEO of ACLI, issued a statement rejecting the “underwriting”
restrictions included in the bill, calling such language "restrictive
to life insurers’ abilities to underwrite on the basis of future travel
to foreign countries,” Keating said. He adds that such language would
be considered an "attack on fundamental concepts of risk analysis.”
Sen.
Aronberg disagrees. “Florida's Deceptive and Unfair Trade Practices Act
does not apply to insurance policies,” he exclaims. “That our bill is
supported by Florida's chief insurance regulator (Kevin McCarty,
Florida’s insurance commissioner) makes me believe that current
insurance regulations are inadequate to address this problem.”
Since
introducing the bill in October, state Rep. Sobel is encouraged by
legislator response. In late January, the bill sailed through the
Insurance Committee with a unanimous 19-0 vote in favor of it.
“And
there were four life insurance representatives on the committee,” she
added. “One big factor leading to the unanimous decision is that
insurance companies could not produce solid actuarial statistics that
it was unsafe to travel to Israel,” says Sobel.
Allstate
Insurance Co., Northbrook, Ill., was one of 13 major life insurance
companies to voluntarily change its position on lawful travel in the
wake of a lawsuit filed in California in 2004. The suit alleged “unfair
business practices” on the part of the 13 insurers, who declined
issuance of life insurance policies for travelers to Israel.
At
one time, Allstate’s policy was to deny coverage if, within two years
from the date of the application, an applicant planned to travel to any
country listed on the State Departments travel advisory.
On
the heels of the California lawsuit, Allstate retracted its policy and
released a statement: “Allstate still believes there is an increased
risk associated with travel to countries on the government’s list;
however, the company is choosing not to use that risk factor for
customers who may travel to Israel, the West Bank and Gaza. In keeping
with sound actuarial principles, Allstate will continue to evaluate
each life insurance application on an individual basis, and will
continue to use a variety of other factors in the underwriting process
in order to determine risk, such as considering health conditions.”
Allstate
also encouraged the other 12 insurers named in the suit to follow
Allstate’s lead and change their policy regarding lawful travel. A
spokesperson for the company wasn’t able to comment on whether or not
any of the carriers complied, but she confirmed that Allstate’s
corporate view on the issue remains unchanged.
In addition
to Florida, other states also appear to be taking the issue seriously.
In July 2005, the state of Washington passed legislation similar to
Florida’s, but proponents of the measure succumbed to pressure from the
insurance industry and tempered language in the original proposal.
Washington’s
legislators amended the original bill and added a clause decreeing that
travel-based denial of life insurance was acceptable if "bona fide
statistical differences in risk or exposure have been substantiated."
In that context, ACLI’s Cornman states that ACLI would not oppose the
bill.
Meantime, Sen. Aronberg hinted that he “would be open
to including such a statistical reference in our bill, especially if it
will assure the bill's passage.”
While
the foreign travel measure continues to be examined in Florida,
Wasserman Schultz told the Miami Herald that she plans to reintroduce
the measure again within the next year. She is counting on support from
fellow legislators, including Rep. Michael Oxley (R-Ohio), the chairman
of the Financial Services Committee.
For now, though, the
ball is in Florida’s court, as the bill is headed to the House Tourism
Committee and will continue to be discussed in the Senate.
As
it moved through committee, McCarty, Florida’s insurance commissioner,
directed insurers to remove travel questions from insurance
applications. ACLI’s Cornman asserts that not all insurers ask about
travel, anyway. He said insurers’ look at many other issues, such as a
person’s access to healthcare, their medical history, or possibly
political conditions in foreign countries. “Every life insurer has its
own policy,” he says. “With over 1,200 insurance companies in the U.S.,
it’s a very competitive industry. Shop around.”
By most all
accounts, the travel debate is not one that is expected to disappear
any time soon. Sobel envisions the issue as having a very broad impact.
“It hurts tourism, and it also hurts religious people who want to go to
the Holy Land,” she says. “It hurts do-gooders, too, those people who
want to help out following disasters, such as the Tsunami in Thailand.”
She echoes other activist organizations in referring to the ability to
deny insurance coverage based on travel to Israel as “discriminatory.
I’m working with the Anti-Defamation League who has made it a national
issue. This bill means a lot to the Jewish community,” asserts Sobel.
Aronberg
contends that “insurance rates are supposed to be based on actuarially
sound data.That's why it is so disturbing to hear stories of travelers
who were charged exorbitant premiums, or were denied coverage
altogether, because of hysteria rather than facts,” notes Aronberg.
“Facts, not anecdotes or stereotypes, should guide insurance rates.”
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