Update News for September 2025

Here is a quick run-down on what you will find in this bulletin:

 

• • Two Year Contestability – Fraud
    
    
  • Tiny Font Bug
    
    
  • Our Current Programming Plans for 2025
    
    

These topics will be dealt with in more detail throughout this bulletin.

Two Year Contestability – Fraud

As background, I (Bob Barney) was licensed to sell life insurance in Canada from 1979 to 1997. When I immigrated to the U.S. in 1997, I stopped renewing that license. I have never had a life insurance license in the U.S.

The Canadian life insurance market is federally regulated. As a result, the policies sold by federally chartered life insurance companies will be the same in one province as those sold in other provinces. The only variation I am aware of, from province to province, are the tax rates applied by provinces to life insurance reserves (usually an internal tax). The only products where the tax actually appears as a difference in premium are for UL policies. A term policy premium in one province is the same as all other provinces, unless the company chooses to NOT offer policies in a particular province. Life insurance contract provisions are the same in all provinces.

In the U.S., the life insurance market is regulated on a state level. In theory each state is or can be different. Having said that, there are two groups that have been working through the years to harmonize the laws of various states to eliminate as many differences as possible. At the lawmaker level there is the National Council of Insurance Legislators (NCOIL). NCOIL is described by Google AI as:

 

• The National Council of Insurance Legislators (NCOIL) is a non-partisan organization of state legislators who focus on insurance legislation and regulation. Founded in 1969, NCOIL aims to preserve state authority over insurance and provides a forum for education on insurance issues.

• Key functions and activities

• Model Laws: NCOIL writes and adopts model laws on insurance. These models are not binding but serve as frameworks that state legislators can use when creating and amending their own state’s insurance laws.

Education: The organization works to educate state legislators and other public policy makers on current and emerging insurance issues.

The second group is the National Association of Insurance Commissioners (NAIC) which is an association of the regulators, mostly insurance commissioners who are either elected or appointed to implement and enforce the state laws. Google’s AI explains the work of the NAIC this way:

 

The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization for the insurance industry. Founded in 1871, it’s governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories. The NAIC’s primary mission is to support state insurance regulators in serving the public interest.

Even so, there are differences state by state. Many companies use unisex rates in Montana although Montana is now allowing companies to move to sex-distinct rates. Previously Massachusetts had unisex rates, but MA changed that about 20 years ago.

The biggest state difference is New York where some companies, in order to avoid some of New York’s more onerous requirements, actually have separate and distinct life insurance companies from which they issue New York life insurance policies. Other companies choose to NOT sell in NY. Often policies sold in New York are much more expensive than the rest of the nation, just as policies in Canada tend to be more expensive than those sold in the United States.

Life insurance policy contracts are one of the areas that the NAIC is working to create uniformity.

This is all background for the reason I have raised this topic in the bulletin. If you can, I would like your help understanding the contestability provision within life insurance policies and differences from state to state. My personal experience with this, as a licensed agent, is from 25 years ago. What I do know is that within every life insurance policy/contract you sell, there is a contestability provision which gives the life insurance company the right to contest the payment of a claim based upon an issue with underwriting information that was provided to the company by the insured/owner at the time the policy was applied for.

In Canada, and in most states of the United States, that contestability is generally limited to a period of two years beyond which the policy is incontestable, meaning that the company has no right to deny payment of a claim even if there was an error or problem with the underwriting information provided by the applicant.

However, and this is a VERY BIG “however”, in Canada the policy may be contested beyond the two year period if there was “fraud” involved in the provision of the underwriting information.

In Canada, one of the best known examples of fraud that allows a company to deny a claim beyond two years is a misstatement regarding smoking. For example, if an insured declared on the application that they had NOT smoked cigarettes for the previous year (or 2 years, 5 years, etc. depending on the stipulation for preferred rates if so issued) then the information provided by the insured about smoking was NOT true. That would then be the basis for the company to contest payment of a claim at any time after the policy was issued. Once again, a misstatement of smoking is widely accepted as “fraud”.

The problem I have is, “Who decides what else constitutes fraud?” For example, the common public understanding of fraud has to do with acts that are considered “criminal” in nature. In those examples someone that was charged with and convicted of criminal fraud can go to jail. There is widespread support for these laws and punishment for breaking them but no one goes to jail for fraud if they lie about smoking on a life insurance policy. Hardly the same kind of fraud so fraud carries a broader meaning than most understand.

In cases of fraud such as the smoking issue it is my understanding that the company investigates, finds evidence to support their belief that the insured made a misrepresentation, and then denies the claim for fraud. The problem with this is that there are no charges, there is no trial, and the presumption of innocence does not exist. In other words, the insured is “guilty until proven innocent”.

If the beneficiary of the denied death benefit decides to fight the insurance company decision, they have to file a civil lawsuit and take the insurance company to court. I am interested in how often this is happening, and how ridiculous are some of the decisions that companies have made in denying a claim for what they say is fraud.

I am reaching out to you, our subscribers (those who are licensed life insurance agents), to hopefully gain more information about the matter. Here are some of the questions I hope you can help me with.

 

• 1. Is the information in the preceding paragraphs correct, or is there something I am missing?

 

• 2. Has there been any significant change to the contestability provisions of policies since the mid-1990’s?

 

• 3. In the United States, is there ANY state in the nation that has a contestability provision that is different from other states.

 

• 4. Is there any difference in the fraud exclusion for any one state versus another?

 

5. Have you ever had a claim on a policy you sold contested or denied for fraud?

NOTE:   If you can help me with any of this, I would like to hear from you. You can email me at:

 

And if you are aware of a difference in the contestability provision between two different states, would you be kind enough to scan the contestability provision of a recent policy (for each state that is different) that you received for delivery to a client.

IMPORTANT:   Please redact any personal information and attach those scanned pages to the email that you send.

And just so you don’t think I am making any of this up, or that there is a need to address this issue, I found two different legal websites talking about this issue, and giving two different points of view. In this article, the subject of fraud is discussed:

 

By contrast, this legal web page says policies cannot be contested and suggests that benefit denials for fraud can only occur in the first two years:

 

The reason for all this is that I am giving thought to writing a book about the denial of claims where insurance companies declare that fraud was involved, and therefore have the right to deny payment of a claim. Compulife has been the victim of such a denial of a claim (not life insurance), and I am aware of another situation where a good friend who was a life insurance agent was denied payment of a claim for the loss of a vehicle to fire. In that case the insurer claimed that he deliberately set his car on fire. Note, I consider arson to be fraud. Also note, my friend was in the car and driving it when the fire began. He ultimately sued and prevailed in court. It’s an interesting story which I plan to tell more fully if there is a book.

And finally, I am aware of hearsay information about claims for life insurance being denied for reasons of fraud, the most obvious being smoking, but there are other stories as well. According to this article, the problem is very common:

 

The article says:

 

It is estimated that as much as two-thirds of all life insurance claims are never paid to the intended beneficiaries. Life insurers make money by collecting policy premiums, but oftentimes they will look for any reason to avoid their contractual obligation to pay the policy when the insured dies.

Is that article correct?

What concerns me in the cases that I am referring to is that there was no criminal fraud, meaning there was no fraud charged by police or a prosecutor. There was no criminal trial to determine the guilt of the charge made. In other words, the insurance companies are merely making the accusation that the matter was fraud and then deny the claim. Once again the presumption of innocence does not exist and, worse, the guilt is determined by a party which is clearly biased. Faced with a claim denial the only recourse for the claimant is to sue the insurance company.

That is of great concern to me, and I would like to investigate the matter more fully. As a claim was denied to Compulife for an allegation of fraud (not fraud alleged against Compulife or myself but a third party) I am personally motivated by this matter.

I think the issue should be of concern to you as well. At the end of the day, the product you are selling (and that Compulife is quoting) is nothing more than a “promise” on a piece of paper. The insurance company promises, in exchange for the regular payment of the owner’s hard-earned money, to pay a claim if the loss set out in the contract occurs. Fine print that lets an insurance company escape its part of that contractual bargain hurts the consumer and damages the reputation of the entire industry.

If it turns out that this behavior is common, then I propose to bring the matter to the attention of insurance lawmakers and regulators. I believe the best way to begin that process is to write a book setting out the facts as I am able to put them together.

Once again, can you help me please? If you can be of assistance with this, I would deeply appreciate it.

Tiny Font Bug

The September monthly update for Canada and the United States includes the latest GOWIN.EXE program which was compiled by the most recent language compiler which we use. In previous bulletins we have told you about a particularly difficult bug that we encountered, a bug we labeled the “Tiny Font Bug” because there were some customers who had VERY tiny fonts in their Pick 12 printouts/pdfs.

We had only two reported cases of that last month, and both were resolved. One of the cases occurred in Windows 11 and the subscriber with the problem was able to identify the settings on her computer that were causing the problem. Having explained it to us, and guiding us through the solution to the problem, we awarded her a free year of software service as our way of saying thanks.

Another subscriber turned up with the problem on a Windows 10 computer, but using “Reset Defaults” and “Reset Pick 12 Styles”, the problem went away.

If you encounter the problem, do not hesitate to call or email us.

Our Current Programming Plans for 2025

The following is the current order for new work that we will be doing in 2025:

 

• • Introduction of New PC Version: CQS.EXE.

 

• • Overhaul Of Current Product Data Files.

 

• Introduction of Compulife Mobile Plus (with Pick 12).

Anyone with questions about any of these upcoming projects can call Bob Barney to discuss:

 

Please don’t email me essay questions; just call. If I’m not in, email me your phone number, I’ll call you.

These planned objectives will easily consume our programming time during the balance of this year and throughout 2025. The good news is that once the product data files have been converted, and we have introduced the new CQS.EXE and upgraded our internet engine to use the new data files, Compulife will be turning its full attention to our web-based, Compulife Mobile software. The long-term goal is to have a web-based product that does everything our PC-based software does.