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Updated June 19, 2014 with a comment from MIB.

Life insurance is arguably the most disturbing financial product a law-abiding citizen can buy. After all, life insurance is essentially an investment on your life that pays off only when you die.

If someone is buying a car, it would be normal for them to consider various features like vehicle safety and gas mileage. Comparatively speaking, someone shopping for life insurance must confront the fragility of his own existence. The mental calculus of this purchase is unnerving, “When am I going to die? What might be the cause of my death? And, how much is my life worth?”

On the other side of the negotiating table, the insurance company needs to calculate the probability of your death before it will invest in your life. However, insurers have smartly recognized that asking customers to help guess their own time and manner of death is an awkward way to sell insurance policies. As a courtesy, life insurance companies will predict your death for you. The professional Las Vegas oddsmakers who take bets for sports games call it “setting the spread.” Life insurance companies call the process “underwriting.”

Estimating Your Demise

Life insurers require massive amounts of information to profitably “underwrite” potential customers, thereby separating risky people (i.e., sick or likely to become sick) from desirable people (i.e., healthy and likely to remain healthy). To feed this insatiable appetite for intelligence, life insurers have built the most sophisticated software tools and deepest pools of consumer data on the planet.

Actually, life insurers have been pioneers in the field of big data and personal analytics for more than 100 years. The Medical Information Bureau Inc. (also known as MIB Inc. and MIB Group Inc.) was founded in 1902 and is America’s oldest and longest continuously operating credit reporting agency. Accessing 100 million records and growing weekly, the Medical Information Bureau (MIB) owns and monetizes, “North America’s largest database of medical conditions on insurance applicants. [Including] diagnosed medical conditions from attending physicians, lab test results, qualified physical exams, self-admitted medical conditions.”

The Federal Trade Commission (FTC) warns Americans that, in addition to medical conditions, data collected and reported by MIB may include an individual’s credit history, driving records, criminal activity, tobacco usage, drinking habits, participation in hazardous sports and “other” data. Under questioning by a Senate Banking Committee in the 1970s, MIB’s former executive director and general counsel Joseph C. Wilberding revealed that the “other” category in MIB files has included information on “sexual deviation” (i.e., homosexuality, effeminate behaviors, bachelorhood, HIV acquisition, and a woman’s questionable “moral character” for giving birth out of wedlock), drug addiction, alcoholism and such hazardous hobbies as auto racing and flying.

Jonathan W. Sager, MIB’s Executive Vice President said: “Let me assure you that MIB does not have codes for ‘homosexuality, effeminate behaviors, bachelorhood, HIV acquisition, and a woman’s questionable ‘moral character’ for giving birth out of wedlock.'”

For insurance company underwriters, the MIB database is like Google for people’s pre-existing medical conditions and secret personal afflictions. Upon the written authorization of a customer to allow MIB searches, the underwriter can efficiently access personal and medical information to make an informed calculation of their mortality (e.g., the odds of death).

To begin searching, the underwriter will open a desktop browser and login to MIB’s web-based suite of data tools. Within the MIB’s portal, the underwriter can: locate anyone’s MIB file; evaluate the MIB medical reports; request more details from other insurance companies; program alerts to automatically track the applicants’ possible undisclosed conditions for two years into the future; and sleuth out frequent-shoppers acquiring too much life insurance.

Although MIB’s medical database is North America’s largest, it’s not the only source that insurers exploit. A similar specialty consumer reporting agency, MedPoint by OptumInsight (a unit of UnitedHealth Group, America’s second largest health insurer), holds prescription drug records on more than 200 million Americans. To collect billions of drug files daily, OptumInsight hosts its own servers directly in the data centers of pharmacy benefit management companies.

Underwriters have instant online access to these prescription history reports, which search back seven years and include: the drugs and dosages prescribed; dates filled and refilled; the therapeutic class; and the name and address of the prescribing doctor. MedPoint by OptumInsight also uses predictive modeling to provide insurers a “pharmacy risk score,” or a number that represents an “expected risk” for a group of people. As a warning to underwriters, higher scores signal higher potential costs.

Where You Stand in This

Consumers are constantly treading water in a dangerous ocean of their own medical and personal data. The Consumer Financial Protection Bureau (CFPB) estimates there are roughly 400 nationwide specialty consumer reporting agencies, give or take a few hundred million data files. According to CFPB Director Richard Cordray, “nationwide specialty consumer reporting agencies can have great influence over a consumer’s tenancy, insurance premiums, [checking accounts], or even employment.”

Before attempting to out-negotiate an underwriter about the value of your own life, you can potentially save thousands of dollars with a little paperwork. A proactive consumer will: (1) contact each relevant specialty reporting agency to request free annual file disclosures (just like your credit reports, you’re entitled to specialty consumer reports annually for free, too); (2) verify all information delivered in those file disclosures; (3) read any insurance applications, scrutinizing for the “privacy” or “medical underwriting” notices; and (4) read any follow-up correspondence from the insurance company, taking specific note of any “adverse action” notices.

The CFPB has put everyone on notice that, as the chief privacy officer of your own life, checking “specialty consumer reports” is officially your responsibility. That means it’s a priority to request your specialty credit reports, in addition to your three major credit reports (which you can do for free at AnnualCreditReport.com) and your credit scores (there are many free sources that allow you to do this, including Credit.com).

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.

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  • AnnualMedicalReport

    Jonathan – Thanks for your response to the article, “How Insurance Companies Predict When You’ll Die.” It’s rare for a senior-level executive and head lawyer for one of North America’s largest consumer reporting bureaus to venture into the comments section to continue a dialogue about the history of his company’s information collection practices. So, I applaud your efforts to start a public conversation about the Medical Information Bureau Inc.’s (MIB) data exchange programs.

    The feedback from the article has been overwhelmingly positive and insurance policyholders are eager for more information. Here are the two most frequent questions that insurance customers are asking, for which MIB has not yet provided a clear explanation: (1) Who are the 450 insurance companies that currently subscribe to the MIB? and (2) What medical and personal “impairments” does MIB currently track.

    MIB’s reach in the insurance industry is unparalleled. At one point, the FTC estimated that, “MIB’s member companies account for 99 percent of the individual life insurance policies and 80 percent of all health and disability policies issued in the United States and Canada.” Yet, it’s extremely difficult for any consumer to decipher how insurance companies are collecting and sharing her personal information.

    The Congressional testimony of Joseph C. Wilberding, MIB’s Executive Director and General Counsel, is a matter of public record. On October 3, 1973, Mr. Wilberding appeared before the U.S. Senate Banking Committee, Subcommittee for Consumer Credit in Washington, D.C. Under questioning by Senator William Proxmire, Mr. Wilberding testified that, “the individual consumer files collected and exchanged by MIB, ‘included data on sexual deviation, drug addiction, and alcoholism.’” (For more, see “AnnualMedicalReport.com Verifies Congressional Testimony of Medical Information Bureau Executive – https://www.annualmedicalreport.com/verification-congressional-testimony-medical-information-bureau-wilberding/“)

    In a lengthy, 1975 interview with the Baltimore Sun newspaper, Mr. Wilberding further explained that MIB’s “sexual deviation” code was “aimed primarily at homosexuals.” Whereas the “social maladjustment” code Wilberding said, “included individuals ‘who are predatory and follow more or less criminal pursuits, such as racketeers, dishonest gamblers, prostitutes, and dope peddlers.’” Congressional testimony by Mr. Wilberding also revealed that the MIB did not independently verify whether the personal information it collected and sold was accurate or truthful.

    Under intense public and regulatory scrutiny in 1974, the MIB claimed to end its practice of collecting information about “sexual deviation” and “social maladjustments.” In 1975, Joseph C. Wilberding, the MIB Executive Director, stated that “the Bureau had voluntarily eliminated these categories from its “impairment” category. Instead, it substituted two new categories that would alert an inquiring company of the “existence” of such information. ‘All that is reported now,’ Mr. Wilberding explained, ‘is that company X thinks they got significant information from an unidentified investigative report. They are not reporting information, but they are reporting the possible existence of information that must be further checked out.’ This left many critics unimpressed.” [emphasis added.]

    In the interests of accountability to insurance customers, will the MIB release the full list of medical and personal impairments that it currently records? (Not the codes, Mr. Sager, just the current list of impairments?) Stripped of the alphanumeric codes, MIB’s “Official List of Impairments” is not a trade secret and it’s not confidential. In MIB’s own words, this ‘list of impairments’ is used to assess “the vast majority” of life insurance customers and policyholders in the United States. I think that Americans deserve fair treatment upfront to know how insurance companies are judging and pricing their applications.

    The MIB is a “nationwide specialty consumer reporting agency” because “MIB reports bear on consumers’ personal characteristics, and they are used in whole or part for the purpose of serving as a factor in establishing consumers’ eligibility for insurance.” (FTC Consent Order, “In the Matter of MIB, Inc.”, March 21, 1983). Federal and state laws provide consumers the right to request their free annual file disclosures from the MIB. All consumers may submit their free annual report request to MIB by mail at “MIB, Inc., 50 Braintree Hill Park – Suite 400, Braintree, MA 02184”; by toll-free telephone number at 1-866-692-6901; or online at http://www.MIB.com.

    Again, Jonathan, I applaud your efforts to join the public conversation about the Medical Information Bureau Inc.’s (MIB) history of collecting sensitive and personal information. In the interests of transparency and accountability for consumers, I hope the MIB seizes this occasion to elaborate on its current data collection and exchange practices.

    JOEL S. WINSTON, ESQ. GENERAL COUNSEL, AnnualMedicalReport.com, twitter.com/MedicalReport.

  • Vikie Palko

    Informative writing . I loved the facts . Does someone know where my assistant might be able to access a blank a form copy to use ?

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