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Laws, Sausage and Life Insurance

We’ve all heard the adage that we don’t want to see how sausage or laws are made. I want to add to the list that you don’t want to witness insurance litigation either.

Occasionally I am involved in litigation support and expert witness testimony and I recently spent many days in a FINRA arbitration hearing as an expert witness on life insurance. It was among my most demoralizing professional experiences.

There is no need to lay out the details of this particular case but it is pretty straight forward, involving much of what is part of many such situations; allegations regarding suitability, misrepresentation, forged signatures, etc. However, what made this case exceptional is the atypical aspect that the writing agent was the star witness for the claimants, not the defense. The claim was against the financial services organization he represented and the insurance company issuing the policy.

While I have no idea how the decision will come down I care about the process because I am not just a “hired gun”. I am regularly asked to help out but I only do so when I see merit with the situation at hand and I feel there is substantive proof of the allegations. Often I have to tell the soliciting attorney that if I were to testify, it would be for the other side. That generally cuts the conversation short.

Also, the point of this post is not to discuss the arguments made but the mentality and actions of some of the parties. First of all, there were sixteen people in the room for a total of seven days over the course of two years! Attorneys, home office personnel, claimants, witnesses, the arbitration panel… The time, money and effort expended was astronomical. This is from a transaction initiated in 2001 and a complaint filed in 2008, after years of arguments and accusations. Originally there wasn’t even a claim for damages; it could have all gone away by waiving a modest surrender charge and doing an internal rollover to a policy with features and performance parameters in line with how the transaction was initially explained.

The fact that so much effort, time and money has been wasted on fighting something so benign and, given the circumstances and testimony, so evident, is shocking. However, I have seen time and time again that insurance carriers, even in the face of obviously meritorious complaints will “go to the mat” without hesitation. Finding a win/win outcome generally seems to be the last option on the table even when it would be innocuous and engender meaningful goodwill. Even when I have had discussions with home office personnel who believe the claimant is entirely justified, the legal department wants to hear nothing of it. They want to fight every time, even when it seemingly isn’t in their best interest.

I realize that there are regular attempts by consumers to take advantage of these companies. Someone is always trying to get away with something and the corporate defenses go up. However, I fail to understand why there seems to be so little effort to winnow the wheat from the chaff.

Following is a partial list of what I experienced:

– consistent intentional mischaracterization of witness testimony
– systematic obfuscation
– continual use of red herrings
– disingenuous comments and insinuations
– feigning ignorance on issues obviously understood
– witness badgering to the extent the arbitrators had to intervene
– character assassination
– wanton disregard for reason and common sense
– calculated deceit & dishonesty
– rampant hypocrisy
– intentionally lying directly to the arbitration panel

To witness this made me ashamed to be a part of the industry. What about all of the commercials and marketing purporting to take care of and focus on customers?

To be clear, I am a proponent of capitalism and free markets and am wary of over regulation. However, it is easy to understand the cynicism of the public regarding “big business” and how they run the show and know how to work the system and hide behind legalese which no consumer could ever reasonably be expected to understand on their own. Besides that, there is the inherent intimidation strategy of throwing resources at a case which most consumers could never expect to match.

As mentioned, I understand there are countless situations of fraudulent claims and these need to be fought diligently. I understand the desire to not acquiesce for sake of precedence. Certainly there are attempted money grabs and claims of unreasonable “damages”. However, to unload with both barrels at anyone with the gumption to complain who, backed by evidence, sincerely feels to have suffered consequences as a victim of misrepresentation is shameful and unconscionable.

There is a pragmatic reason I care as well. All of this makes my life, and those of everyone trying to professionally deliver products and services to the market, needlessly difficult because the cynicism is understandably ramped up to such a level that we spend a meaningful percentage of our time convincing prospects we’re not the bad guys. We have to spend significant effort trying to convince the consumers that the same corporations marketing to them aren’t going to do everything they can to take advantage of them and pull out all the stops to fight them when the first thing doesn’t go their way. In other words, cynicism isn’t fabricated; it’s earned.

There has to be a better way.

UPDATE: I recently learned the arbitration panel ruled in the claimants’ favor and awarded damages. I am pro-insurance and generally pro-corporation but it does feel good to see irresponsible parties held accountable.

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