Merritt Personal Lines Manual: A Key Issue: Replacement
IMPORTANT MESSAGE TO OUR POLICYHOLDERS -- REPLACEMENT OF COVERAGE
Canceling a health insurance policy which you already own and purchasing a new one, on account of encouragement by any agent, is called replacement. Some states have laws which forbid any misrepresentation or incomplete comparison by any agent that may occur at the time of replacement. Those laws require that a written and signed comparison of your existing policy and the recommended new policy be given to you.
Beware of anyone who encourages you to replace this policy without allowing you time to carefully investigate the replacement proposal, or discourages you from talking with a representative of the company whose policy is being recommended for replacement.
For your protection, if you are encouraged to replace this policy, we urge you to seek advice and to take the time to investigate any recommendation. Keep in mind that you can request changes in this policy long after its effective date.
This is another warning concerning replacement of health insurance. Canceling existing health insurance (or, for that matter, life insurance) and purchasing a new policy can expose you to reduced benefits and new limitations on preexisting conditions. For these reasons, state laws frequently require that a complete written comparison of policies be provided when replacement is recommended.
More than a few unscrupulous salespeople will promise that their new, cheaper insurance covers you for everything that your existing policy does. Some will even talk about "continuing benefits" or "rolling over" coverage. Don't believe any of this without seeing the replacement policy.
You should carefully investigate any replacement proposal you hear. As this item says, your existing policy can almost always be modified if you need a change in benefits.
The 1992 Colorado appeal court case Life Investors Ins. Co. of America v. Bruce Smith dealt with some unsavory health insurance sales practices. Bruce Smith was the insurance commissioner for Colorado at the time of the lawsuits, which originated in a consumer-protection action.
In the summer of 1982, Charles Cozza went to work for a construction company. After he'd started his job, the construction company discontinued its group health insurance coverage for employees. At the request of the employer an insurance agent, John Yannacito, spoke to the company's employees--including Cozza--about the availability of individual health insurance.
Yannacito talked with Cozza about the possibility of obtaining medical/hospitalization insurance for Cozza and his wife Kim, who was then about six months pregnant. After some initial discussions, Yannacito contacted Life Investors' general agent in Colorado, Jerry Campbell, about insuring the Cozzas. He told Campbell that Kim Cozza was six months pregnant.
Campbell in turn called Life Investors' home office and spoke with an employee about obtaining health insurance for the Cozzas. Campbell didn't say anything about Kim Cozza's pregnancy. However, Campbell went ahead and told Yannacito that health insurance was available for the Cozzas despite Kim's pregnancy. Yannacito relayed the message to the Cozzas.
