After one of my advisor of Lebanese origin submitted life applications on his friends of the same origin, all of these apps were declined because all of the applicants had a dream of visiting one day their native land. This started a war between me and the underwriters because as I said to them: “I dream of one day of going to Mars and since I am certain it is more dangerous to dream about going to Mars than Lebanon, does this mean I am uninsurable?”
The advisor had chosen not to ask the questions on the life app and use tele-underwriting. The problem was with the person conducting the interview who had recorded the dream of visiting Lebanon as a real intention to go to this country. Sadly once the client’s answers are put on paper; it is extremely hard to make a correction even if there is an error.
This has potential catastrophic consequences as the decline was going to appear on MIB and would impact the insurability of the client. This is like a bad entry on your credit history. It will forever follow you. From this angle, it seems advantageous to ask all of the questions found on a life application. However there are serious risks associated with field underwriting.
The whole polemic surrounding whether a life advisor should complete a full application by asking all of the medical questions or whether he should he arrange a telephone interview and let a third party ask these pesky questions is heavily influenced by the demographic or group age of the advisor with older advisors preferring to do the work themselves and the younger preferring to delegate.
Is there one solution better than the other?
To answer this question I will be using an actual case that has been the subject of a court decision. We will therefore review Kong versus Manulife heard by the Supreme Court of British Columbia in 2008
To summarize the case simply, the plaintiff was Patimass Kong wife; beneficiary of a life insurance policy taken by her husband of $1 million in 2001. The defendant was Manulife and the agent was Brian De Coteau.
In 2004, Mr. Kong was shot and killed in Cambodia and Manulife refused to pay the death benefit claiming there had been material misrepresentations on the part of Mr. Kong. These possible misrepresentations were arising from the questions asked by the nurse and answers by Mr. Kong regarding his medical history. The agent De Coteau was not involved with the taking of the medical history.
Right here we see a great advantage of not doing field underwriting. If De Coteau had been involved, he would have been included in the lawsuit. If he had asked the questions and put the exact same answers as the nurse, would the insurer have stood by his side or tried to blame him? It is very likely that a complaint would have been made to the regulator and De Coteau would have found himself under investigation having to defend himself and his reputation.
The medical history was in relation to the following question where Mr. Kong had answered negatively to each of the question:
7. THE HEART, BLOOD VESSELS, such as:
(a) Heart murmur, shortness of breath, swelling of ankles, irregular
pulse, rheumatic fever, or poor circulation?
(b) Heart disease, angina, chest discomfort?
(c) High blood pressure?
(d) Have you ever had any electrocardiograms or other heart investigations? If “Yes”, give type, when, why, what result.
8. THE NOSE, THROAT, LUNGS, such as: asthma, tuberculosis, chronic bronchitis, persistent cough, pleurisy, emphysema, allergies, tumour?
Manulife denied the claim on the basis that Kong had complained and seen a doctor in 1996 regarding chest pains associated with nasal congestion. His doctor as part of the investigation ordered ECG in addition to sinus and chest x-rays. The sinus and chest x-rays came back negative and there were no heart problems. The conclusion of the specialist was that the ongoing cough may have been due to asthma or reflux and so he referred Mr. Kong for a pulmonary function test. However after further investigation the conclusion was that Kong did not suffer from asthma but instead his persistent coughing was the result of allergies which was treated with Claritin.
So truly and literally, the $1 million question is whether Kong should have answered yes or no to the question 7 as it is written. By answering no to question 7, did Kong make a fraudulent misrepresentation?
The position of Manulife was that Kong should have answered “Yes” to questions 7(a), (b) and (d) because he had two ECGs in1996. Manulife also stated that Mr. Kong should have answered “Yes” to question 8 because he had seen his doctor about a cough which could, accordingly, be described as persistent and were suggestive of asthma.
The position of Kong’s wife was that the questions, 7 and 8, were not clear and therefore the tribunal had no choice but to decide in their favor.
In reviewing the case, the judge found that based on the doctor’s evidence, Kong did not have any problem with his nose, throat or lungs such as asthma or persistent cough. Mr. Kong’s knowledge of his condition must have come from his doctors. If those doctors concluded that he did not have problems with his heart, nose, throat or lungs, then he could not have answered affirmatively to the questions in issue.
“There is no doubt that Mr. Kong answered question 7 correctly if the portions of the question after the phrase “such as” are not considered. The question asks if, to his knowledge, he ever had or had been told he had any problem with his heart or blood vessels. Mr. Kong did not consult his doctor because of heart problems but rather because of a cough and chest pains. Dr. Winder advised him that her preliminary diagnosis was sinusitis or a problem with reflux. However, as a careful physician she undertook other investigations to rule out heart problems. That process required a reference to a specialist because of the unusual squiggle in the ECG. However, the investigation, including a second ECG, revealed that Mr. Kong did not have a heart problem. Dr. Lai likely advised Mr. Kong of his conclusion because we know that he referred Mr. Kong for a pulmonary function test to consider other diagnoses. Dr. Winder received the consult report and also advised Mr. Kong that he did not have a problem with his heart. Accordingly, based on the advice he received from his doctors, his answer was correct.
Accordingly, to Mr. Kong’s knowledge, he did not have a heart problem such as chest discomfort or shortness of breath. His answers to the questions were thus truthful. There was no need to advise the insurer of symptoms that were unrelated to a heart problem.”
The judge pointed out that there was a big problem with question 7:
“The difficulty with the question as framed is that it is first and foremost an inquiry about a heart problem. It calls for a positive response if Mr. Kong “ever had or been told he had a problem with the heart”. He was specifically told by his physicians that he did not have a problem with his heart. If Manulife wanted to be advised of all heart investigations, whether or not those investigations resulted in a diagnosis of a heart problem, then the question which is set out at 7(d) should have been asked as a separate question and should not have been prefaced by the inquiry about a heart problem. The combination of the two questions in one creates an ambiguity.
The context – the fact that sub-question (d) is prefaced by the general inquiry about heart problems – is what creates the ambiguity in this case. Applying the contra proferentum rule to question 7(d), I find that Mr. Kong was only required to respond in the affirmative if he “ever had or been told [he] had any problem with …the heart”. Accordingly, his answer was correct and there was no misrepresentation.”
So do you think that the judge was right? My opinion is absolutely. I am also a programmer and therefore well versed into logic. Question 7 as it was written is a “if statement” based on a Boolean condition with sub-question a, b, c, d only applying if the condition of the heart problem was true.
What if the advisor De Coteau had decided to complete the life application and therefore asked the questions? Well there would be two possible results. The first result is that De Coteau would not have been informed by Kong of his medical history. As stated this means that De Coteau would have also been blamed by the Kongs for not having explained correctly the medical question and would have been named on the lawsuit.
The most interesting question is what would have happened if De Coteau had been informed of the ECG when he had asked the medical question? What should he have put on the application? If he had written yes, he would not have asked the question as stated and as a result he would have prevented Kong from obtaining the coverage as Manulife would have found him uninsurable. The client would be out of $1 million insurance.
If the De Coteau had simply asked the question as stated and put negative to the ECG even knowing about the existence of the 2 ECG, then Manulife could have cancelled his agent contract on the basis he had committed fraud for not being loyal to Manulife and not providing all of the medical information.
In the end, if De Coteau had completed himself the application he would have put himself in a no win situation. Whatever would have happened, he would have been blamed for the consequences.
The answer to whether an advisor should ask the medical questions is basically simple. If as an advisor you believe you are a professional before being a businessman, then if you believe you can add value to the underwriting process by doing field underwriting then this is what you would do despite the risks to you as a professional.
If you believe you are a businessman before being a professional, then you should never do field underwriting as the answer is a simple cost benefit analysis. There are simply not enough benefits associated to field underwriting for the risks involved.