Capitol eyes insurance rates, Israel travel

JEFFERSON CITY –Planning a trip to Israel this summer? You might want to put off any changes in your life insurance policy in the near future.

That’s because many life insurance companies use travel destinations as one reason to deny or limit coverage. Travel to Israel is a frequent target of life insurers nervous about the risk clients take while traveling in foreign countries.

The problem, said Karen Aroesty of the Anti-Defamation League, is that such discrimination is often based on perceived risks that bear little or no relation to reality.

“The companies have no formal data about the foreseeability of terrorist incidents to provide the kind of assessments that life insurers normally rely on,” Aroesty said. “If you go to Colombia, you might be at higher risk of kidnapping and death than you would be in the Middle East. Or in Missouri, you might have more risk of West Nile virus. Or in California, maybe it’s salmonella. But we don’t really know.”

The Missouri Senate on April 30 approved legislation to address the problem. The bill would prohibit life insurers from denying coverage, refusing to renew a policy or charging a higher rate based on an applicant’s past or future travel destinations unless they have data to support their decision.

Such a decision, the bill says, must be based on “sound actuarial principles or … related to actual or reasonably anticipated experience,” the bill says. Any violation of the new rule would be considered an unfair trade practice, which would make the company subject to fines of up to $50,000.

Sen. Scott Rupp, a Wentzville Republican who sponsored the bill, told his colleagues that the bill still allows life insurers to charge different rates or deny coverage if they can show that the travel truly involves a higher risk of death.

“This bill simply says that you have to have real reasons,” Rupp said. “But you can’t decide to charge more or refuse to issue a policy because of some willy-nilly idea that maybe this area is dangerous.”

Such discrimination based on travel alone is unfair, Rupp said, when the risks are no greater or even less than living in the United States. He noted that the annual homicide rate in Israel is 11 for every 100,000 people. The rate in the United States is 17, or 55 percent higher.

Aroesty said discrimination against travel to Israel makes little sense because security within the country is so tight. Because of the threat of anti-Israel fanatics, many places have armed security guards and soldiers routinely patrol major public spaces.

Life insurance companies attempted to justify the difference by saying it applied to any country on the U.S. State Department’s travel advisory list. But that list is highly politicized, often arbitrary and constantly changing, Aroesty said. At one time, it made no distinction, for example, between travel to hot spots such as Gaza or the West Bank and travel to Tel Aviv or Jerusalem.

“In Israel, if you get hurt, the most likely cause will be a car wreck,” Aroesty said. Such a discriminatory policy is inherently unfair because it is not based on factors that affect life expectancy or the risk of injury, she said. Life insurers were even discriminating based on past travel when, “obviously, the applicant hadn’t died,” Aroesty said.

The Missouri legislation is part of an effort around the country to prohibit such discrimination after the failure to pass legislation on the national level. The push grew out of the experience of U.S. Rep. Debbie Wasserman Schultz, a Florida Democrat who was turned down for life insurance by American General, which cited “potential travel to Israel” as the reason.

Such a policy forces Americans to choose between insuring their lives and legal travel. She filed legislation in 2006 to block the policy, but it died in the U.S. Senate.

“The freedom to travel is a part of our way of life and if we start denying legal travel abroad, then we give in to Osama Bin Laden, Hezbollah, and other terrorists who wish to change our way of life,” Wasserman Schultz said when she filed the bill.

Similar problems have cropped up in Missouri. Aroesty said a St. Louis-area woman sought a $4 million term-life policy shortly before a two-week bicycle trip to Israel. The company responded that it was inclined to deny the application because of the trip to Israel. But it would be willing to give a $1.5 million whole-life policy at a substantially higher price. The failure of federal legislation has moved the battle to the states. In California, a lawsuit against 13 life insurance companies over such decisions prompted Allstate Insurance Co. to drop its blanket policy of denying coverage of people traveling to Israel.

Washington and Connecticut have both adopted laws similar to the Missouri proposal.

While travel to Israel helped spark the legislation, Aroesty said more Christians and Muslims would benefit from the law than Jews. The legislation protects Christians taking trips to the Holy Land, Muslims making their pilgrimage to Mecca and Arabs traveling to other countries in the Middle East, she said.

This is the second year such legislation has been introduced in Missouri, but the first time it has been debated by the full chamber. Rupp, the sponsor, said the life insurance industry dropped its opposition to the bill when language was added that allowed companies to discriminate based on actual risks.

“The bill lets companies charge higher rates or deny coverage when a location has a higher death rate or because of disease or special dangers,” Rupp said. “But it has to be backed up by statistics.”

The bill has been sent to the House. But with the legislative session scheduled to end May 16, the House must move quickly if the bill has any chance of becoming law. Aroesty said she remained optimistic.

“I’m hopeful,” Aroesty said. “This is something that should have a lot of appeal on both sides of the aisle. If (legislative leaders) want it to happen, it will happen.”