The US Department of Labor (DOL) has undertaken an investigatory initiative centered around the serious issue of “insurability” under life insurance benefits, as highlighted in a recent news release. The problem herein lies in the failure to complete the process of confirming the evidence of insurability. The evidence of insurability can be described as the proof that an individual is an acceptable risk for insurance. This concern arises when insurance premiums are collected for ERISA (Employee Retirement Income Security Act) insurance benefits but there is a breakdown in the crucial step of verifying insurability.
With this vital step being overlooked, the employees are left in the lurch. They proceed under the belief that they have insurance coverage, but when the time comes to rely on it, they found it wasn’t available due to the evidence of insurability not having been confirmed. This issue erodes the trust and faith employees have in their insurance providers and is a matter of concern for both the legal and insurance industry.
The DOL has stepped in to address these concerns and ensure that the process of confirming insurability is duly followed. The investigative initiative seeks to identify and address these gaps in the insurability process. Prevention of these practices will bring more transparency and efficiency in the insurance sector and will enhance the trust of the employees in their insurance providers.
Taking note of this development and staying in compliance will be critical for insurance providers, especially those offering ERISA insurance benefits. Keeping abreast with regulatory changes and ensuring evidences of insurability are properly collected and processed can help providers avoid regulatory scrutiny and potential litigation.
Brought to attention by Morgan Lewis – ML Benefits, this new initiative by the DOL sets a precedent for the insurance industry and reiterates the importance of transparency and adherence to procedure for all stakeholders involved.