A Wall Street Journal article tells of how a new trend in life insurance is for customers to submit their applications and buy their life insurance online.
Obviously, this development bypasses the traditional agent-customer relationship where the agent visits with the customer and submits the paperwork.
Insurers are culling information from other online databases, such as motor vehicle and prescription drug records, and using it along with the online application answers to estimate risk and issue policies. A motivation for this new business model is the general decline in the sale of life insurance policies over recent decades.
For the customer this means no blood pressure reading, no blood and urine test, and it is more likely that the customer can lie about his weight!
From the standpoint of a life insurance attorney, I have mixed feelings about this model. On the one hand, I have seen situations where agents will instruct or assist customers in filling out incomplete or misleading information on the life insurance application. Later, when the insured dies within the two-year contestability period, the insurance company can claim that a material misrepresentation was made and deny coverage. With the new model, on the other hand, it is just the customer completing a questionnaire via computer in the privacy of his home or office.
Agents are available to explain how policies work. Some agents are better (and more accurate) than others. Bypassing the agent can be a good or bad thing, depending on who the agent is. Some are great, while for others what is paramount is their own interest in making a commission.
Finally, I think that the medical testing is a good thing. It may uncover health information that the insured forgot about it. The more information that is out there for the insurer to view, the better the chance the beneficiary later has of defeating a material misrepresentation defense.
It seems everything is going online these days, from buying books to buying groceries and to trading stocks. It seems inevitable then that life insurance would follow suit.