A Shoppers Guide to Life Insurance

Abstract

For years, mail order insurance has created serious problems for the unwary consumer. With this bulletin, the Federal Trade Commission attempts to familiarize the consumer with some of the more flagrant practices that have caused complaint. The bulletin begins by alerting the consumer to the legalistic nature of insurance policies. It indicates that one should seek clarification of the difficult terminology from a friend or business acquaintance. The drawback with this idea is that it is difficult to find competent individuals to evaluate the proposals. The main emphasis of the bulletin is on enumerating the gimmicks that are used to induce a person to enter a contract. The first practice noted is that in which solicitations are sent out to a veteran, or family of a veteran, from an organization which appears to be part of the United States Government. The envelope might resemble those used by a governmental agency, or the letter might contain labels such as Veterans Division, or Military Life Insurance Policy. These letters are not sent out by the government, but by private insurance companies. Another gimmick that is explained is when health insurance policies offer high benefits, but only upon some rare occurrence. The bulletin points out the preexisting conditions clause, the age restrictions, and the restricted continuation provisions of the contracts. The final practices that are discussed concern the 'Medicare policies which are offered by private industry to supplement the government's Medicare program, and the policies which are advertized to be lowest cost or Guaranteed Lowest Premium, etc. The Federal Trade Commission welcomes inquiries about improper practices. However, it carefully explains that premium rates, financial soundness, and settlement of claims are matters outside its jurisdiction. Complaints of this nature should be filed with the state insurance department. The FTC can deal only with misleading and deceptive practices. This bulletin provides useful information for the consumer who is inexperienced with mail order companies. Little new information is afforded to those familiar with insurance. Of course, the bulletin was not designed with the latter in mind. Several precautions should have been added for increased consumer protection. It would have been useful to alert the public to the unsound practices of certain alien companies. It would have done well to caution the consumer against purchasing insurance from companies that are not licensed in his state. The price of the bulletin is ten cents, and it is ten cents well spent. It could save the consumer many dollars.