Insurance Company Issued Incorrect Illustration to Client.

[tk69]

For years I have had the insurance company run current illustrations for my client annually. Recently my client decided to surrender his ul policy.

A recently run current illustration provided by the insurance carrier shows that he should have $9000 additional guaranteed value than his actual surrender value.

Apparently, the illustration information was inputted wrong by the insurance company and may have been wrong for the last several years. These illustrations were sent to my client and me by the insurance carrier

Has this happened to anyone else? My GA tells me it does happen a lot and there is nothing one can do.

How can trust any illustrations if this is true, especially trust policies?

Wouldn't the insurance company be liable for the discrepancy? if so, how?

How does an insurance agent protect himself from this?

 

[rousemark]

For years I have had the insurance company run current illustrations for my client annually. Recently my client decided to surrender his ul policy.

A recently run current illustration provided by the insurance carrier shows that he should have $9000 additional guaranteed value than his actual surrender value.

Apparently, the illustration information was inputted wrong by the insurance company and may have been wrong for the last several years. These illustrations were sent to my client and me by the insurance carrier

Has this happened to anyone else? My GA tells me it does happen a lot and there is nothing one can do.

How can trust any illustrations if this is true, especially trust policies?

Wouldn't the insurance company be liable for the discrepancy? if so, how?

How does an insurance agent protect himself from this?

Keep your E&O up to date!

 

[VolAgent]

Fortunately it came from the home office, right? If so, you have no liability, you had no role in preparing it and were unable to generate your own to compare against what the home office sent.

Of course, you can still be sued, but you're not the deep pockets here. That is the insurance company. I'm not sure an insurance company can prepare a document such as an inforce illustration, be wrong on the current values, wash their hands and then just walk away. However, for $9,000 it is questionable whether the person will be able to get an attorney to take it on contingency.

This is why the ability to sue and class action lawsuits are so important. With arbitration, a company can screw a whole group of people for a small amount and never face legal or financial penalties other than a bad reputation.

(No, I'm not an attorney, no I did not give legal advice, and no I did not sleep at a Holiday Inn Express last night).

 

[WinoBlues]

I have found different mistakes by insurance companies. In most cases they have made things right, with some prodding. Taking it a level or two higher than the person that could get fired over it is important. Then start stair stepping up the chain.

If the annual report or renewal reports had verbiage suggesting they request an inforce from the company I would include that in the packet the insured sends the company.

 

[rousemark]

Fortunately it came from the home office, right? If so, you have no liability, you had no role in preparing it and were unable to generate your own to compare against what the home office sent.

Of course, you can still be sued, but you're not the deep pockets here. That is the insurance company. I'm not sure an insurance company can prepare a document such as an inforce illustration, be wrong on the current values, wash their hands and then just walk away. However, for $9,000 it is questionable whether the person will be able to get an attorney to take it on contingency.

This is why the ability to sue and class action lawsuits are so important. With arbitration, a company can screw a whole group of people for a small amount and never face legal or financial penalties other than a bad reputation.

(No, I'm not an attorney, no I did not give legal advice, and no I did not sleep at a Holiday Inn Express last night).

Can't say the agent has no liability. In a suit, their lawyer is going to claim that if the agent was reviewing the proposals he should have noticed something was wrong. After all, apparently it was the agent that finally caught the mistake in this case. Even if the agent has no way at all of knowing a jury might still find him liable. No matter what the end result might be, the legal fees could be substantial.

 

[VolAgent]

Can't say the agent has no liability. In a suit, their lawyer is going to claim that if the agent was reviewing the proposals he should have noticed something was wrong. After all, apparently it was the agent that finally caught the mistake in this case. Even if the agent has no way at all of knowing a jury might still find him liable. No matter what the end result might be, the legal fees could be substantial.

It appears it was only caught when the check didn't match the illustration. No real way to catch it prior unless there is just a sudden and huge jump in the numbers from one year to the next.

And yes, as I mentioned the agent can always be sued. He actually probably will be, so he can be flipped against the company. Remember, the company is the deep pocket and the agent is going to make a great witness against them.

I never said it as an excuse not to have E&O, and to say that the agent can't or won't be sued. Merely that the ultimate target will always be the company. Particularly in a case where everything came from the company.

 

[aclaro]

Just throwing this out there...

Typically when I see a surrender value that much lower than a guaranteed value it is due to surrender charges.

How long did the insured have the policy in force?

 

[WinoBlues]

Just throwing this out there...

Typically when I see a surrender value that much lower than a guaranteed value it is due to surrender charges.

How long did the insured have the policy in force?

the in-force illustration should show net surrender values.

 

[TxJohnny]

Surely the Insurer will point out the annual statements they mailed out each year are correct, and consistent with the surrender value they paid.

Good luck arguing the illustration supersedes the annual statement, especially when the illustration likely has a disclaimer stating it is "only an illustration and not guaranteed."

 

[scagnt83]

Surely the Insurer will point out the annual statements they mailed out each year are correct, and consistent with the surrender value they paid.

Good luck arguing the illustration supersedes the annual statement, especially when the illustration likely has a disclaimer stating it is "only an illustration and not guaranteed."

This was my thought as well. They sent statements that we would assume are correct. IF the annual statement was incorrect too... then he has a case.

But an illustration is not an official statement of values. Especially an inforce.

Any decision to Surrender or Exchange should be made based on the yearly statement. Not an illustration. Any yearly review using inforce illustrations should be in conjunction with the annual statement.