May 4, 2006 Thursday

Wall Street Journal

By RACHEL EMMA SILVERMAN

As more Americans travel to remote parts of the world for both business and pleasure, controversy is growing over a little-known insurance-industry practice: denying customers life insurance because of their foreign-travel plans.

Many life insurers, including Allstate Corp., AXA Equitable Life Insurance Co., Fidelity Investments, Lincoln Financial Group, MetLife Inc., New York Life Insurance Co. and Prudential Financial Inc., use customers' overseas-travel plans as a factor in making underwriting decisions, and some may deny a policy or increase premiums to customers going to countries deemed dangerous. Some companies even deny coverage based on previous travel to a dangerous region. The countries that trigger denials are often on the State Department's travel warning list, which includes popular destinations such as Israel, Indonesia and Kenya.

Now, a rapidly growing number of federal and state lawmakers and insurance regulators are starting to fight the little-known but widespread practice. Last week, Colorado's governor signed a law restricting insurers from using foreign travel to bar coverage, and Florida's legislature recently passed a similar bill. Another bill in Connecticut became law a few weeks ago. In February, Georgia's insurance commissioner issued a directive ordering life insurers in the state to stop using past or future travel to deny policies, unless an insurer had "sound actuarial" reasons to do so. Maryland, California and Washington passed laws restricting the use of certain foreign travel in underwriting decisions last year; New York and Illinois passed their own laws in 2004; and Massachusetts, New Jersey and Louisiana recently proposed bills on the issue.

On the federal level, a congresswoman who was denied life insurance because she had said she might go to Israel introduced a House bill last fall that would ban insurers from denying coverage or charging excessive premiums solely because of future foreign travel. A separate bill introduced in the House would prohibit insurers from using past travel as a reason to deny life-insurance coverage.

"As an American you can lawfully travel pretty much anywhere in the world," says the congresswoman, Debbie Wasserman Schultz (D., Fla.). She received a denial from American General, a unit of American International Group Inc., that cited "potential travel to Israel." (AIG declined to comment.) Rep. Wasserman Schultz says, "You are asking Americans to choose between insuring their lives and legal travel."

The controversy comes as international travel is booming. "Adventure travel" to exotic places has become routine -- even fashionable -- and the globalization of American business is increasingly sending executives to the developing world. Despite terrorism, natural disasters, health scares and other worries, air travel overseas by U.S. citizens grew 5% in 2005 from a year earlier, according to preliminary estimates from the U.S. Commerce Department. U.S. air travel to the Middle East jumped 14% in 2005, while travel to Asia and South America both rose 10%.

The issue also arises for the many Americans who have family ties abroad. Last year, Beatriz Parga, a Miami Realtor, sought to increase her life-insurance coverage. She had plans to visit Bogota, Colombia, to see her ailing mother. Despite being in good health, Ms. Parga was turned down by two insurers because of her travel plans. "I thought it was so absurd and unfair," Ms. Parga says. "Things can happen anywhere -- in the World Trade Center, the Pentagon, in the subway or the train."

The State Department's travel warning list -- used by many insurers in determining whether to issue or deny a policy -- currently contains 26 countries, including popular travel destinations like Israel, as well as battlegrounds such as Iraq, Afghanistan and Sudan. (The list can be found at travel.state.gov/travel/cis_pa_tw/tw/tw_1764.html1)

But some regulators argue that insurers have yet to provide legitimate mortality or other actuarial data to justify using foreign travel to deny coverage. Critics say that insurers haven't proven definitively that travel to countries such as Israel or Kenya is more dangerous than travel in other places -- including the U.S.

The insurance industry's practices can also pose a problem for companies sending their employees overseas. Companies often provide group life insurance, but when employees want to supplement that, it may be hard to procure individual coverage -- even for people who live or work in countries that seem relatively safe. Insurers also may be reluctant to cover people going overseas for extended periods of time because of foreign regulatory issues.

The National Association of Insurance Commissioners is also examining whether foreign travel is a legitimate underwriting tool. "Companies have yet to show any actuarial justification for the questions on travel," says Jim Poolman, North Dakota's insurance commissioner, who is chairman of the association's life-insurance and annuities committee.

The life-insurance industry has opposed some of the legislative proposals. "We have concerns about bills that would limit our ability to underwrite fairly and properly," says Whit Cornman, a spokesman for the American Council of Life Insurers, an industry group based in Washington. Insurers say that in a time of global terrorism, foreign travel is a valid risk factor, especially when applicants are going to countries that the U.S. State Department specifically warns Americans against visiting.

Still, insurers stress that when making decisions on policies for travelers, they look at a host of criteria, including the purpose of travel and length of stay -- so you might not automatically be denied coverage just because you plan to embark on, say, a weeklong honeymoon in Bali, even though Indonesia may be deemed unsafe. At the same time, an insurance firm could have concerns about travel to countries that aren't on the State Department list.

Insurers solicit travel information differently, and applications vary by state. When permitted by state law, most major life insurers' applications will ask about overseas travel plans, but the period they look at can range from six months to two years from the time of application. Some insurers may ask about previous travel in order to establish a risk pattern. Insurers may also seek more details in follow-up interviews or questionnaires, such as the duration and purpose of a trip, or whether you are traveling with a tour group.

If you are a frequent foreign traveler or have a trip planned to a risky country, there are some things you can do to increase your chances of getting life insurance. For starters, it's smart to shop around. Companies' policies vary. State Farm, for instance, says that it asks about immediate foreign travel in its applications, but it may still issue policies to people that plan to travel to countries on the State Department list.

Lee Slavutin, a life-insurance agent in New York, also recommends taking advantage of employers' group life-insurance coverage if it's available. Group life policies tend to require less-detailed application information than individual life-insurance policies, and travel may not come up. Another option: a specialized travel-insurance policy. Most such policies cover things that could go awry on a trip, such as a canceled flight, but may provide additional coverage for accidental death.

Also, contact the insurer and your insurance broker if you think you are being unfairly denied -- and get the reason in writing. Last summer, Alan Becker, of New City, N.Y., applied for a life-insurance policy with Lincoln and mentioned that he had been to Israel last year for his nephew's bar mitzvah. The insurance policy came with an amendment saying it would be issued with the understanding he would not travel to Israel in the future. But after Mr. Becker and his broker contacted the insurer, Lincoln agreed to drop the amendment, as long as Mr. Becker didn't have any existing plans to go to Israel.

Thomas Johnson, a Lincoln spokesman, said the company can't comment on any individual application or decision, but it "includes anticipated foreign travel in its underwriting practices for life insurance, along with many other standard considerations." The company is reviewing its foreign-travel underwriting policies "in light of the changing legislative environment."