ATIC New York Taxi Insurer Insolvent

The headquarters of American Transit Insurance Co. in Freeport, a few miles into Nassau County. The 52-year-old, family-owned firm is vital to how New Yorkers zip around the city. American Transit, also known as ATIC, insures roughly 60% of New York City’s more than 117,000 commercial taxis, livery cabs, black cars and rideshare vehicles.

It’s insolvent - ATIC has for decades been the dominant player in New York City’s commercial car insurance market, the largest in the country, offering cabbies premiums far lower than other insurers. In the second quarter, it posted more than $700 million in net losses.

The losses follow years of warnings from industry analysts, and disagreements between ATIC and its third party actuary. The company’s reserves have been considered deficient for decades and the problem has come to a head as the company wrestles with larger claim sizes driven by bigger settlements as well as jury and arbitration awards. A potential ATIC failure would mean tens of thousands of taxi drivers without insurance, throwing the city’s complex transit ecosystem into turmoil.

The insurer’s losses grew so large that they have crossed a threshold known as a “mandatory control level event". 

Too Big to Fail - There is a perception that they are too big to fail; There would be a large void in the ability to get a taxi or an Uber or a Lyft or a limo in New York as all of these vehicles would suddenly be without insurance.”

The only other insurance carriers that would be able to pick them up currently would possibly struggle with the volume of business. In that case, “every taxi driver or limo driver is going to have a significant increase in their insurance premium” as rates adjust to reflect real risk. That could upend an industry already battered by headwinds including increased competition and plunging medallion values.

The premiums that they were charging were not commensurate with the risk they were taking on. It raises questions over ATIC’s ability to pay claims. Uber Technologies Inc. sued ATIC in federal court in February, accusing the insurer of “a pattern and practice of failing to adhere to reasonable claims-handling practices and failing to reasonably resolve claims,” resulting in 23 lawsuits brought against Uber and its drivers over crashes involving bodily injuries. That left the ride-share giant to pay “substantial amounts” to defend itself.

In 2021, a actuarial consultant found the company was roughly $500 million short of the money considered necessary to cover its unpaid losses and loss-adjustment expenses. That kind of determination is exceptionally rare. ATIC’s responded to S&P that he didn’t agree with Huggins’ opinion because of the “unique nature” of the New York market.

If corrective action is not successfully implemented by the company and further adverse development continues, the possibility exists the company could be placed in some form of receivership or liquidation.

Multi-level Selling Life Insurance

The case of a life insurance agent in Alberta who was fined for selling a policy on an insured in intensive care is notable for both its paltry penalty and the gaps it has revealed in training and compliance.

The Alberta Insurance Council fined a life agent $500 for misrepresentation after she submitted an application for a life insurance policy in 2022, when the insured was in intensive care with a brain injury following cardiac arrest. The insured died about a week and a half later.

No Medical Exam Policy - The whole life policy was a “simplified issue product,” which doesn’t require medical testing and is an option for people with critical health conditions.

The agent met with the prospective policyholder — who was also the would-be beneficiary — via Zoom. (A marketing specialist had generated the sales lead through social media.) The policyholder was an in-law of the insured, and the life agent wrongly assumed someone in the background was the insured. The policyholder told the life agent the insured didn’t speak English, but the policyholder would translate questions and answer on the insured’s behalf.

According to the decision, the agent was aware the insured had diabetes but on the application failed to accurately respond to questions about the diabetes, as well as the insured’s heart failure and hospitalization.

In investigating the death claim, policy underwriter discovered the insured had been hospitalized several times since 2017 because of congestive heart failure and also had chronic kidney disease.

Agent - The agent failed, in her role as an insurance agent, to ensure that the insured understood the questions on the insurance application and that the answers being provided by the policyholder were accurate to the responses provided by the insured, as there was a language barrier present between the agent and the insured.  The agent did not take appropriate steps to verify the identity of the individual present with the policyholder during the … Zoom meeting.

While the penalty for the single offence could have been up to $5,000, the council decided on $500 “[g]iven the evidence that the agent has no previous discipline, fully engaged with the AIC, acknowledged guilt, was genuinely remorseful, took voluntarily active steps including undertaking relevant continuing education courses, and given the exceptional circumstances in this case.”

Training or Lack of It - If there was no responsibility on the insurance intermediary to ensure accuracy of information, then the insurer would presumably be assuming risk on which it had no basis of information, as is the case here. Therefore, it is not unreasonable to expect a high standard of due diligence to be practised by insurance intermediaries when soliciting and finalizing insurance documents.”

The Financial Services Regulatory Authority of Ontario (FSRA) said last year that it took enforcement action against dozens of life agents contracted with WFG and two other MGAs following a review the regulator conducted from May 2022 to April 2023. The review looked at firms that tie compensation to recruitment, creating the potential to focus on recruitment to a greater extent than agent suitability and customer needs analysis.

Among other things, the report found gaps in agent training and supervision, and a failure to follow best practices. Of 46 WFG life agents examined by FSRA, 39 (85%) were cited for best practices issues.

In FSRA’s review of the multi-level-marketing firms, a 2021 questionnaire of the 46 WFG life agents found that 19 (41%) placed business with ivari (56% cited iA Insurance, 46% cited Equitable Life Insurance Company of Canada, and 11% cited Manulife Assurance Company of Canada).

Understanding Contestability Period

The life insurance contestability period refers to the time after policy approval when an insurer can still investigate claims. In some cases, this may result in claim denial, forcing Policyholders to seek legal recourse if they wish to attain coverage. In short, this contestability period is a window of opportunity for insurers to determine if any information given on the application was false or incomplete.

What Is the Life Insurance Contestability Period
The life insurance contestability period typically lasts two years from the date of policy approval. During this time, an insurer has the right to investigate any aspect of a policyholder’s health that could have been misrepresented on their application. If it finds that information was intentionally withheld or falsified by the applicant, it can deny coverage or void the contract entirely.

The purpose of the life insurance contestability period is twofold:It serves as a deterrent against fraud by allowing insurers to thoroughly vet applications. It helps insurers spot any misrepresentation and helps control the cost of insurance due to misrepresented claims.The contestability period exists on most types of life insurance policies, including term life and permanent life insurance policies.

Why Is the Contestability Period Important
The life insurance contestability period is an important part of the process as it allows the insurance company to investigate a beneficiary’s claim and verify its accuracy. This guarantees that the policyholder will receive a fair payout if their claim is accepted, and prevents fraudulent claims from being paid out. This also helps to keep premiums affordable for policyholders.

Additionally, the contestability period safeguards the integrity of the insurance company and ensures that it is not taken advantage of by claimants. By giving the insurer time to investigate all aspects of a claim, it can ensure that only legitimate claims will be paid out. Ultimately, this helps make sure that policies remain affordable for everyone involved.
What Happens If You Are Caught Lying on a Life Insurance Application?

If you are caught lying on a life insurance application, the consequences can be severe.

Depending on the specific details of the case, your policy could be canceled. Furthermore, insurance companies may deny future coverage for years and even initiate legal action against you if you have been dishonest about your information. If convicted of insurance fraud, you could face hefty fines and jail time in some cases. It is important to remember that any dishonest behavior in relation to a life insurance application can lead to serious repercussions that could last for years.

Common examples of dishonesty occur during the medical exam process where applicants may not share the entire truth. Or, they purposely apply for no-exam life insurance to try and hide a medical condition. If the insurer finds medical records that contradict the original information on an application, it may result in the denial of the death benefit to the beneficiary.

Misconceptions About the Contestability Period
Many people assume that the contestability period is short and it may be hard for the insurance provider to challenge them. However, the truth is that the contestability period lasts two years from the date that the policy was issued. During this time, an insurer can challenge any claims made by the policyholder if they deem them to be incorrect or invalid. On the flip side, policyholders can request a review of their policy in order to ensure that they are getting the coverage amount they need and deserve.

Another misconception about the contestability period is if the insurance company cannot find something that you didn’t disclose, there is no more recourse for the insurance company. While this is not quite as common, it does happen. Here is an example: An insured stated on the application they were a non-smoker. Twenty years later, the insured died due to lung cancer. When the insurance company investigated the claim, it found that the person was smoking before and during their application for life insurance. The result was a reduction in the claim. The insurance company essentially went back 20 years and charged the appropriate smoker rating plus interest to the policy which substantially reduced the death benefit the beneficiaries received. This is an example of material misrepresentation and caused a change that affected the insured’s loved ones in a meaningful way.

One final example of a misconception about the contestability period is that agents can manipulate information to get the client the best deal. The insurance agent has a contract with the insurance company to represent its products to you, so they have an obligation to tell the truth.

How To Navigate the Contestability Period Successfully
The key to navigating the contestability period successfully depends on providing accurate information and disclosing all relevant information during the application process. This includes providing detailed answers about any pre-existing medical history or lifestyle factors which could affect your risk level, such as smoking cigarettes or participating in extreme sports or activities like skydiving. It is also important to make sure that any additional paperwork requested by the insurer is completed fully and returned promptly so that their investigation process can continue without delay.

Contestability Period vs. Incontestability Clause
The contestability period and the incontestability clause are two important features of a life insurance policy. The contestability period is typically two years from the date of application, during which time the insurance company has the right to investigate any information on the application that may be deemed inaccurate or fraudulent. If any inaccuracies or fraud are discovered, it can deny coverage or rescind the policy.

An incontestable clause states that after a policy has been in force for a certain amount of time (usually two years), it cannot be challenged by an insurer on any grounds unless there is definite proof of fraud at that time. Once an insurance policy becomes incontestable, even if a material misrepresentation was made when applying for coverage, it cannot be challenged.

Not every life insurance policy has an incontestability clause that removes a challenge to a claim, in whole or in part, if fraud is discovered.

Suicide Clause and Contestability Periods
The suicide clause typically states that if an insured individual takes their own life within a certain period of time after signing up for the policy, then the beneficiaries will not receive any benefits from the policy. This clause is usually in place to prevent fraud as it prevents anyone from taking out a life insurance policy solely to benefit their beneficiaries in the event of suicide.

This clause normally has a two-year window and overlaps with the contestability period, during which insurers can investigate any misrepresentations or inaccuracies on a policyholder’s application. This means that even if all relevant information was accurately disclosed at the time of application, if an insured party commits suicide within this two-year period, then the insurer can deny the claim. If a suicide occurs outside of this timeframe, it will be treated like any other cause of death.

The Bottom Line
Understanding the two-year contestability period is essential for anyone looking into obtaining life insurance coverage. It is important for applicants to disclose all relevant medical information, as well as facts about their lifestyle, accurately and honestly to avoid potential claim denials down the road during this two-year window after policy approval.

6,000 Motorcyclists Accidental Death A Year

Malaysia - we lose more lives from accidents road accidents compared to Covid-19. Malaysia is among the Southeast Asian countries facing this issue, especially involving motorcycle riders. Although the death rate per 100,000 people came down from 27% in in year 2000 to 22.5% in 2019, it’s still among the highest in the world. Motorcycle riders and their pillions made up 65% of road accident deaths last year (2023)

There are over 6,000 road accident deaths involving motorcyclists every year, and the burial space required for that is almost the size of six football fields. 

ABC Sales Cycle Life Insurance

Building a strong sales process is a proven way to improve your close rate and is perhaps the most important thing you can do as a sales manager. No matter what kind of insurance product you sell, your producers will benefit from having a defined process to follow, starting from when they receive a lead all the way through to closing the sale.

While you may have to experiment to find the best insurance sales workflow for your particular agency, you don’t need to reinvent the wheel. At a high level, most effective sales processes follow certain best practices.

How to get started building an insurance sales process that covers these five key phases:

Prospecting
Preparation
Outreach & Presentation
Address Objections
Close

1. Prospecting - The first step in any sales process is prospecting. The focus of this stage is finding or attracting new prospects who have an interest in the products and services your agency offers. Sales reps use a variety of sources, both online and in-person, to find qualified leads to whom they can reach out and connect. A service like EverQuote can help you and your team excel in the prospecting stage by providing you with high-quality leads who have shown intent to buy. 

2. Preparation - Before you communicate with a lead, consider how you want the interaction to go and prepare for it. This includes planning every step of the process on the way toward the sale, having a script of what you want to say during a phone call, and gathering any sales materials and information you need to either reference or send to the lead.

Being prepared for sales communications increases the chances that they will proceed the way you intend—with a positive outcome. Use templates as much as you can, whether it’s a script for a phone call or for email or text messages. Agencies, especially newer ones, need to practice and refine these materials on a daily or weekly basis to develop a strong sales approach to plug into their insurance workflow process.

3. Outreach & Presentation - Once you’ve sourced qualified prospects and prepared your scripts, it’s time to contact the lead and present your case. For digital leads, we have found that the average sale happens anywhere from one to three weeks after initial contact, so we recommend a 21-day sales cycle that includes 8-10 touches with the client (illustrated below).

It’s very important to contact every lead as soon as possible. When you first receive the lead’s information, call them immediately. If you don’t get them on the phone, call them again within the hour, leaving a voicemail or sending a text message. If you haven’t heard from them by the end of the first day, send an email as well, so they understand why you’re reaching out.

Keep a regular outreach schedule for the first three weeks. If contact has not been made in that time, give the prospect another call right before you hit the 90-day mark. (Twenty percent of closures happen in months two or three.) Often, consumers will be shopping around looking for the best price, and sometimes they may be looking ahead for pricing a few months before intending to buy.

4. Address Objections - Once you get your prospect on the phone, you need to be prepared to address common objections. Having a script or knowing how you will respond makes it easier to continue guiding the conversation forward. Here are ways you can respond to four of the most popular objections in the insurance sales process:
“I’m not free to talk at this moment.”

For a sales person, this should never be considered an objection. Consumers looking for insurance are often busy people, and just because they can’t talk at that moment doesn’t mean they can’t in the future. Ask them for a better time, schedule a call and send them a calendar invite, and follow up before the call. After scheduling the follow-up call, send them personalized information (such as a quote or projected cost savings) by email or text to make them more interested in speaking with you.

“I’m just going to do it online.” - Many consumers don’t understand the value that working directly with an insurance agent brings. Have a 10-20 second response prepared in response to this objection to emphasize the service, consultation, and personalized level of support they can receive from working with you that they won’t receive by only looking to buy online.

“I’ve been called too many times.” - There will always be people who feel they’ve been contacted too frequently, by too many salespeople. Be empathetic. Don’t keep them on the phone, but ask if they’re open to receiving more information or reconnecting at a later date. Respond along the lines of, “Since you took the time to fill this information out online, I wouldn’t be doing my job if I ended the call right now. Could I send you with a little information about what you could be getting, and follow up at a later date?” Then, send them the agreed-upon information by email or text.

“I did not request a quote.” - This one is specific to online leads. When you partner with a quotation. 100% of the information you receive is directly from consumers. Prospects may say this if they don’t feel comfortable talking on the phone to a stranger.

Don’t offer a quote or try to sell right away. When you receive a lead’s information, the first thing you want to do is confirm whatever information you have—such as address or auto make and model—with the consumer. Once you have confirmed their information, and the fact that they are interested in insurance, that validates your call and makes the consumer feel more comfortable talking with you.

5. Closing - All the above stages are building toward a close, when the lead agrees to a mutually-beneficial contractual agreement to work with your agency. While working through the steps above, a salesperson should always assume a prospect will close and this is where the conversation will end.

When speaking with the prospect, always be prepared to transition to the closing step. Have paperwork and logistics ready, and be ready to answer any final questions. If they aren’t closing that day, end the conversation with a clear understanding of the prospect’s intentions and next steps.

Insurance Fraud - Double Death Claim

A 55-year-old woman from Mumbai's Bhayander allegedly faked her death twice in two years. But why, you may ask? To claim insurance worth Rs 1.1 crore, of which Rs 70 lakh had already been paid out. The family managed to deceive four insurance companies.

How did she carry out the fraud - Kanchan Pai, alias Pavitra, bought insurance policies from Max Life, Bharti AXA, HDFC, and Future Generali, totalling approximately Rs 1.1 crore. After purchasing the policies, the family declared Kanchan dead and submitted fake death and cremation certificates to claim the insurance money.

Between 2021 and 2023, the insurance companies disbursed Rs 70 lakh based on these fraudulent claims. The scam came to light when one of the insurers noticed discrepancies while processing an additional claim of Rs 41 lakh, prompting an internal investigation. 

The first reported fake death occurred on October 11, 2021, with Kanchan’s son, Dhanraj, submitting documents that led to a payout of Rs 20.4 lakh after verification. Another insurer settled a claim of Rs 25 lakh for the same ‘death’.

On October 20, 2023, another death was recorded under the name Pavitra, with Rohit, the husband, receiving Rs 24.2 lakh. However, an audit in January 2024 raised suspicions due to inconsistencies like the same address but different names of the insured on Aadhaar and PAN cards, prompting insurers to exchange information and uncover the fraud. Realising their scheme was exposed, the family absconded.

In another case, last year in January, a man with insurance policies worth Rs 7.4 crore faked his death in a car accident. The man had multiple policies and staged a fatal accident to claim the money, highlighting the lengths to which individuals will go for financial gain.

Rising Insurance Premium - India

Rising insurance premiums have become a pressing issue for consumers. HDFC Life, ICICI Prudential, Bajaj Allianz and Max Life Insurance have hiked their term insurance premiums by 4 per cent to 7 per cent in past months. As consumers grapple with these rising costs, understanding the underlying reasons and exploring strategies to mitigate the impact is crucial.

Claims Experience - of insurers is the usually biggest factor behind premium hikes. Based on it, they have to keep revising the premiums periodically. They may revise the premiums themselves. Alternatively, their reinsurers may have increased the reinsurance premiums, after which insurers pass on the increase to customers.

Life Insurance companies are actively working to address the rising cost of life insurance. One key strategy is aligning with the Insurance Regulatory and Development Authority of India (IRDAI)'s push for affordable insurance.

Technology - Insurers are exploring ways to make life insurance more cost-effective through technological advancements. By automating underwriting processes and utilising data analytics, companies can improve efficiency and potentially offer lower premiums.GST rationalisation is another factor that can make life insurance more affordable. 

How can consumers tackle rising premiums?

Compare premium: One of the most effective ways to combat rising premiums is to compare quotes from different insurance providers.

Take advantage of discounts: Many insurers offer discounts such as bundling multiple policies, maintaining a claims-free record, or completing safety courses. Consumers should inquire about available discounts that could help lower their premiums.

Utilise top-up plans: Top-up health insurance plans offer additional coverage at a lower cost compared to standard policies.

Review and adjust coverage: Regularly assess your insurance needs. By understanding your financial goals and risk tolerance, individuals can tailor their insurance policies to meet their specific requirements without overspending.

Pay premiums in advance: Some insurers allow policyholders to pay premiums for multiple years upfront, which can lead to discounts.