Here we go again! I have a customer that has a 20 year term policy in force with American General. It’s been in force about 6 years and when I called the other day for an annual review he asked what it would cost to convert $100,000 of the policy to permanent.
I asked the home office to send me an illustration and as I always do I asked them to make the conversion to their best no lapse guarantee UL. Imagine my surprise when I received an illustration for a universal life policy that was only guaranteed 10 years. Suspecting they had not paid attention to my request I called and asked what lifetime guaranteed products were available for conversion. They told me that the 10 year guarantee was the only product available on policies that have been in force for more than 5 years.
This was news to me and also news to all of the other agents I talked to. The marketing person I was talking to at the home office did admit that this was a change they had made at the first of the year and that there was no notice sent to policy owners or agents to warn them of the change or explain why the change was necessary. I asked why they felt the change was necessary and the person I was speaking with couldn’t really answer that.
I expressed how that seemed at best shady and that it didn’t seem a stretch to call it unethical since the conversion language in their term insurance policies says “We will make a permanent individual life policy available for exchange…We will not require the insured to submit evidence of insurability”. There is nothing permanent about a policy with a 10 year guarantee even if they make it appear permanent through assumptions and there is no language saying that the products available for conversion change after 5 years. Note that during the first 5 years you can convert to any permanent product the company has, some of the best products on the market. At five years they take that away and only allow conversion to a pile of doo. I asked her to have someone call me that could answer the question
I then spoke with Richard Aubert, a senior management person in marketing for American General. I asked him the same thing. Why? His answer and I hope I can make this clear because it’s actually appalling was, “The decision was made because we felt that American General was putting itself in a position of anti-selection by offering guaranteed permanent products. We felt that most people that convert after the 5th year are doing so because they have had a health change!” Well, duh!! The reason that policies are convertible without evidence of insurability is so that their is no anti selection against the insured population.
I asked him what kind of data they had to show that anti selection was an issue and his answer was that as far as he knew “there is no actuarial evidence to back up their concern”. Even if there was evidence, taking the permanent out of the conversion option is ethically and morally wrong and American General, dripping in tax payer dollars, should be ashamed. Oops, got emotional. I also asked Mr Aubert if they had any thoughts about changing this stance and he said he would check into it and email me an answer. He sent this, “Also, at this time we don’t have any new products being developed for the conversion process. However, I did voice your concerns to management and they will take it under advisement. Please let me know if you have any questions.” I emailed back and asked if AIG had any problem with me blogging this information all over the universe. No answer so I have to assume that he and American General are good with it all.
Bottom line. This is not new territory. Another company pulled a very similar disgraceful act against their policyholders late last year and when I didn’t shut up they pulled my appointment. They told me they would consider reinstating me if I pulled the posts and assured me they were working on a solution to the problem. I pulled the posts as much as I felt really wrong for doing it. They then didn’t reinstate me and to date they haven’t made any changes in their conversion option and the new product they came out with, a Term/UL, really sucks. Lesson learned. I won’t be bullied into shutting up again.