The Agent sold Dr. and Mrs. Jones two 20-year term policies in 2000, each having a $5 million death benefit. Dr. and Mrs. Jones are high wealth clients with many insurance and investment products in their portfolio. The monthly premiums for these particular policies were $300/month for Dr. Jones and $250/month for Mrs. Jones. Their policies were set up to pay the premiums through automatic monthly bank account deductions.
The Update To The Policies
In 2010, the Joneses wished to replace these policies with two new 20 year term policies in order to extend their coverage period. Because the Agent was no longer affiliated with the original term life insurance company, he could not instruct that carrier to cancel the policies nor cancel the bank drafts. When the Agent met with the Joneses to complete the paperwork for the new term policies, he gave them verbal instructions to contact the original insurance company to cancel the policies. He also instructed them to stop their automatic payments from their bank.
The Agent recalls that Dr. Jones was a little concerned that the new policies had a new two year contest ability period associated with them and was considering holding on to his old policy until the two year period was completed. The new policies then issued and were also set up to be paid by automatic monthly drafts from the account.
The Angry Phone Call & Demand For Refund
About 5 years later, the Agent received an angry phone call from Dr. Jones. He had noticed that the $550 monthly drafts were still going out of their account for the original term policies. He claims that the Agent told them that the Agent would cancel their policies for them.
Dr. Jones is demanding that the Agent refund to them all the payments they made toward the original term policies since 2010 ($33,000). The Agent is adamant that he instructed Dr. and Mrs. Jones to contact their carrier and bank to take care of this since he did not have the authority to do so. There is no documentation in the Agent’s file from 2010 that would evidence that he instructed the Joneses to cancel these old policies on their own.
- If an Agent is working with a customer to alter or enhance their insurance portfolio, the Agent’s file should clearly reflect the customer’s current policies and the Agent’s recommendations. Evidence that the pros, cons and mechanics of such changes were discussed in detail and understood by the client is necessary.
- The Agent should also put instructions like the type discussed in the in the above scenario in writing to the customer so they have a clear understanding of what is required. Both the Agent and the customer are best served if there is a clear understanding of what needs to be done and by whom to accomplish the customer’s goals.
- Besides putting a professional in the best possible position to defend a potential claim, an additional benefit of this type of comprehensive communication and analysis is that it may lead to additional business from a satisfied customer.
- Be guided by the insurance maxim – “If it is not documented, it did not happen!”