Insurance customers urged to beware of loans


Published: Sunday, January 11, 2004 at 6:01 a.m.
Last Modified: Sunday, January 11, 2004 at 2:54 a.m.
TRENTON - James L. Campbell has been a businessman for decades and seen a lot of financial ups and downs, but the lesson he got about insurance loans in 2003 is something he had never run up against.
He found out that insurance companies are not required to notify Floridians about loans.
Campbell's father, who was also named James, died about four years after spending 40 years making $4.10 monthly payments for a life insurance policy that should have paid $5,000 to his son's survivors.
James Campbell said he knew nothing about the policy until after his father's death, and nothing about a $199 loan taken out against the policy that has been growing each year. The interest charged on the loan was being compounded and now totals $2,100. If Campbell were to die now, his survivors would receive $2,900, because the insurance company would deduct the outstanding loan from the $5,000 death benefit.
"I not only never knew about the policy, I also never knew about the loan because no one ever sent any statements, even after my dad died. So how could I know there was interest due?" Campbell said.
State officials said what happened to Campbell was unfortunate and rarely happens, but it is something that buyers need to be aware of when they are shopping for insurance and when they borrow against it.
"Although we like companies to issue annual loan statements, there is no state law requiring notification, and apparently Mr. Campbell was not being notified," said Justin Glover, a spokesman for the Florida Department of Financial Services, which investigated the policy in October and November. "Customers need to be diligent in checking their policies because a loan like this can accrue interest. This is something that should be considered in selecting a policy, and something that everyone needs to be diligent in checking on regularly."
Campbell's policy has been transferred between insurance companies because of mergers and sales a couple of times and is now held by Unitrin, which is headquartered in Chicago. On its Web site, Unitrin identifies itself as a multi-line insurance company with "Over $7.5 billion in assets, over 6 million insurance policies in force and more than 110,000 consumer finance customers. Unitrin's companies employ nearly 9,000 associates."
A company executive declined to elaborate on Unitrin's policies.
"We believe we have given all the information to the parties and we really don't have any additional comment," said Ed Konar, Unitrin's vice president of investor relations.
State officials told Campbell he has three options - pay off the loan, allow it to continue accruing interest or surrender the policy, which has a cash value of $425.
"Here the situation was the son had no knowledge of the policy and so he was unable to take action before his father died, so it's like a mortgage debt on a home being passed down to a child when the parents die," Glover said. "This is an unfortunate situation for this gentleman and we sympathize that he has had a debt dropped in his lap, but it is a legal debt and has accrued interest."
What happened to Campbell raises the ire of Bill Newton, the executive director of the nonprofit Florida Consumer Action Agency.
"Legal does not mean right," Newton said. "If something like this is not a crime, it certainly should be. It is certainly unethical. This is why we regulate insurance companies."
Newton said many insurance companies do business the right way, but some do not.
"Folks tend to think the government is looking out and watching out for them, but it really is a buyer-beware situation with insurance," Newton said. "Ask a lot of questions, read before you sign and don't sign if you don't completely understand."
Man taught lesson on insurance loans TRENTON - James L. Campbell has been a businessman for decades and seen a lot of financial ups and downs, but the lesson he got about insurance loans in 2003 is something he had never run up against.
He found out that insurance companies are not required to notify Floridians about loans.

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