Wednesday, December 31, 2014

(No.279) " Buying life insurance in Canada: Part 1 - accidental death insurance is a lottery"

"Some informed opinions on buying life insurance in Canada:
Part 1 -- accidental death life insurance is a lottery."

by Alastair Rickard

As one who for years was both employed in the life insurance business and a public critic of it I was also dismissive of both certain journalists writing about it and of several self-appointed 'expert critics' of both insurance products and those who distributed them.

The main reason: they simply did not know that much about the business. In fact they operated (and largely still do) so far below the bar set by Joseph Belth, that longtime American leader in insurance criticism, that reaching it would for most require a rather long step ladder.

I do not aspire to write anything that might be termed a guide to buying life insurance in Canada. However I do have some opinions about insurance products. They are informed by both experience in the insurance business and knowledge of its products. They may be both interesting and useful to some of those who find worth their time.

This is the first of what will likely be a series of occasional columns.


The purchase of life insurance specifically providing death benefit protection in the event of accidental death (AD) generally reflects public ignorance and superstition as well as life insurance company culpability in both selling and shamelessly promoting not just a deceptive but essentially useless form of life insurance: i.e., a benefit payable only in the event of what is actually the highly unlikely accidental death of the insured.

Accidental death life insurance has as much to do with financial planning as does the buying of a lottery ticket -- to which both can be likened. If a life insurance death benefit is needed it is needed IF one dies and regardless of HOW one dies.

For many years I deprecated (both publicly in speeches and in the Canadian Journal of Life Insurance as well as within the life insurance companies by which I was employed)  the sale of accidental death insurance whether such coverage takes the form of an individual policy or an AD rider attached to an individual policy or group insurance.

The sale and ownership of such coverage encourages the illusion among its buyers that genuinely useful death benefit protection has been put in place while appealing to the unfortunate perception among many, perhaps most of its buyers that they have secured comparatively cheap life insurance death benefit protection. Indeed I have occasionally wondered if some AD buyers actually understand that AD coverage will pay off only if death results from a (non-excluded type) accident.

For such reasons as these, combined for some AD purchasers with the 'lottery ticket' appeal [ 'will I die accidentally?'], accidental death coverage has been a partial exception to traditional buyer resistance and to the need for active agent involvement in the sales process, i.e., an exception to the long standing industry axiom that most individual 'life insurance is sold not bought'.

Some life insurance companies have been led to conclude (foolishly in the main) that individual life insurance policies of the more expensive, 'non-lottery' type can be sold extensively and directly and with at least as much ease as, say, the AD coverage with which one of the big Canadian banks graciously informed me annually they had endowed me ['$1000 of free AD for a year -- and wouldn't you like to buy some more of this wonderful accidental death coverage?']

 Not being in the same risk  group as, say. a 16 year old male driving a sports car or a hang glider in the Himalayas, I declined each year's invitation as almost completely irrelevant. 

I have long believed that some deeper psychology is involved in the relatively greater appeal to some buyers of accidental death coverage than of the death benefit protection provided by ordinary individual life insurance policies, something beyond the lottery ticket and cost appeal aspects of AD. The New York Times (May 6, 2008) provided an interesting answer in an article entitled "Appeasing the Gods, With Insurance".

U.S. university research indicated that "tens of millions of people bought life insurance for scheduled flights in the U.S. [although]  not one of the [previous year's] insured passengers died in a crash. At some level they [apparently] believed that their [flight] insurance helped keep the plane aloft....

"We buy insurance not just for peace of mind or to protect ourselves financially but because we share the ancient Greeks' instinct for appeasing the gods... A magical belief in insurance sounds crazy because at a rational level we realize that our decision to forego an insurance policy is not going to affect pilots or mechanics. But ... because calamities are so vivid and easily brought to mind, we tend to overestimate their probability when we intuitively judge what will happen if we tempt fate."

If this sounds far-fetched as buyer motivation, how would you prefer to explain the purchase of life insurance by rational people, coverage that never or very rarely pays anything to anyone and is of financial benefit almost always only to the life insurance company issuing the coverage?

The fact that there are many members of the public ignorant or misguided enough to waste their money buying flight insurance or accidental death insurance (or, for that matter, tickets on government-operated lotteries) does not lessen by one jot or tittle my longstanding disagreement with the fact that the life insurance industry not only takes advantage of such ignorance but actively promotes and sells to it. It is a fundamental ethical question for the industry and one that, in the main,  has been avoided.

If life insurance companies were sincere about meaningful disclosure actually useful to consumers, they ought long since to have taken action -- for example -- requiring that every buyer of accidental death insurance must read and sign a form that requires that buyer to indicate that he or she understands that while everyone dies, relatively few of us die accidentally and in terms of the life insurance coverage he or she is about to purchase, a death benefit will be paid ONLY if he or she dies accidentally?

Such meaningful disclosure could be combined with a clear  statement of the actuarial likelihood of accidental death happening to the prospective life insured based on his or her age and gender?

How about including with this sort of needed consumer disclosure a pithy, attention-grabbing quote to assist the understanding of prospective buyers of accidental death insurance?

For example, something like this [from Discover  magazine]: " if nothing else killed you [excluding old age and disease, then an American adult] would on average live to be 1,743 years old before a fatal accident."

Such disclosure would not eliminate the purchase of accidental death insurance but it would certainly reduce it -- and that would be a positive change. More importantly it would support the proper use of life insurance as part of one's financial planning and, when death benefit protection is needed, its actual purchase instead of a lottery ticket called accidental death insurance.

The bottom line for life insurance buyers:

  • Do not waste on accidental death life insurance financial resources at your disposal for paying premiums on real life insurance -- a core element of a financial planning pyramid.
  • Buy an 'ordinary' life insurance policy that will pay its death benefit to your beneficiary regardless of the cause of your death.
  • Accidental life insurance is, as a product, the life insurance industry's own version of a lottery ticket.




previous columns & blog archive:
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are listed chronologically in the margin beside each column
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Saturday, December 13, 2014

(No.278) "Black & white in Savannah GA"

"Black and white in Savannah, Georgia"

by Alastair Rickard

The first time we visited Savannah, Georgia was quite awhile ago and  before the publication of 'the book' (as Savannahians refer to it), an event that transformed the city from a destination for mainly southern day trippers into a magnet for visitors from around the world.

'The book' was John Berendt's "Midnight In The Garden of Good and Evil", now commonly referred to as a non-fiction novel ( q.v., Truman Capote's "In Cold Blood"). 'The book' was published in 1994 and focused on events in Savannah which had occurred in the 1980s.

"Midnight In The Garden of Good and Evil" remained on the New York Times  bestseller list for a record 216 weeks having sold 3.3 million copies by the end of 2004. The book was also loosely the basis of the 1997 movie of the same name directed by Clint Eastwood.

When Pat and I first visited Savannah in the late 1980s the city was attracting fewer than 3 million visitors a year. By 2002 this number had more than tripled to 10.2 million -- because of 'the book'.

Why would a book that has been described as little more than a gossipy tale of a drag queen and some other Savannah characters mixed with a murder mystery have become one of the best selling works of English non-fiction ever? Apparently the answer remains a mystery to many Savannahians.

The central character in the book is Savannah antique dealer John Williams who was tried four times for killing a local male prostitute but not convicted. Williams, who died of pneumonia in 1990, lived in one of Savannah's historic antebellum mansions. We visited his Mercer House although I do not recall meeting Williams.

I do remember visiting the Hamilton-Turner House, also in Savannah's historic district, and being welcomed and squired around by Joe Odom, a gregarious Georgia lawyer who insisted on playing a grand piano for us (and singing) "Hard Hearted Hannah (the vamp of Savannah Ga)". Odom too became a character in the "Midnight" book. He died of AIDS complications in late 1991.

I was reminded recently of our initial 'pre-book' visit to Savannah by a New York Times article (Oct.3, 2014) written by Ron Stodghill: "Savannah, Both Sides".

For many years I have kept travel diaries whenever Pat and I go on a trip. Having read Stodghill's piece about the treatment of  black history today in Savannah I dug out my travel diary of our own first trip to the city.

The Stodghill article explains how a visitor today could leave after a week "without a clue about the essential role Georgia's oldest African-American community has played here". I not only do not doubt this assertion but I can state based on our own experience that it was even more the case 25 years ago.

Before going to Savannah back in the late 80s (and of course it was 'pre-Google') I had run across a passing reference in some Canadian publication to a black history tour being available in Savannah. As visitors who usually take tours the first time we visit a place, we had planned to include a black history tour among others.

On this initial visit to Savannah we had booked a stay (one not repeated subsequently) at the centrally located Hyatt Regency hotel overlooking the river front. It is a large modern structure, an architectural excrescence in the historic district, one that stands out like a boil on a baby's bum. Unfortunately the preservationists in Savannah were apparently not yet politically strong enough to prevent its construction and the demolition of historic structures which necessarily preceded it.

We took numerous tours of Savannah and area for which information and tickets were available at the Savannah Visitors' Centre and the tour desk in the hotel. At both places I asked for information and tickets about a black history tour. No matter to whom I spoke the answer was a blank look; they knew nothing of such a tour. Nor was there any suggestion of how I might contact someone who might know.

The history tours were led by charming and articulate white guides who, if they mentioned the presence of blacks in the area, did so only in passing and usually in the context of the Amercian Civil War. Other than such casual references black history did not exist. Eventually after several tries I found a telephone number and reached a person who arranged for us to take the "Negro Heritage Tour".

In his recent New York Times article Stodghill suggests that "the public persona of this city has often seemed -- perhaps intentionally -- stuck in its own kind of gauzy antebellum bubble". It certainly was that in aces a quarter century ago when our historical tours, while interesting, were so one-sided that they scarcely acknowledged the presence of its black residents either then or in Savannah's history.

The Negro Heritage Tour was not only interesting and informative but as we had expected it presented a perspective absent from tours organized by the Savannah Historic Foundation and others. Our tour was led by Walter Simmons, a retired public school principal who for thirty years had been involved in black education in Savannah and had himself grown up when the city was still segregated. He was a guide with a quiet commitment to his subject and much information to share.

There were four others on the tour who rode with us in the van driven by Simmons: two mature black ladies from Los Angeles we had met previously on a visit to the Andrew Low home and a young couple from Washington, D.C.. The husband recorded the tour guide's commentary as part of his research of his black 'roots' and worked hard at remaining distant from the rest of us.

This Simmons' black history tour visited areas where Savannah blacks past and present lived and he discussed at length local history and people, issues and politics. It was a perspective that could not have been further removed than it was from the white history tours we had already taken.

At one tour stop -- the First African Baptist Church built by slaves (on their own time and with resources they had themselves) -- we were welcomed by a church deacon and an elder who showed us around including a hiding place that was used as part of the Underground Railroad before the Civil War.

The deacon, the elder  and Walter Simmons each spoke with great feeling about a former pastor of the church, Ralph Mark Gilbert, who had died in 1956. He had been the church's pastor from 1939 to 1956 and a highly esteemed civil rights leader during the 1940s and 50s. I recall vividly the passion and conviction with which they expressed their pride in Gilbert and indeed their resentment of what they felt was the ignoring by the media of him as a leading father of the southern civil rights movement. In my diary later that day I wrote the following: "they said that Martin Luther King Jr. would stand in Gilbert's shadow by comparison".

After a lengthy tour of Savannah we ended the Negro Heritage Tour at the nascent black history museum located in the King-Tisdell Cottage which, like the tour itself, had been started in the 1980s by black volumteers to try to provide visitors with a black perspective on Savannah history absent from other tours on offer locally.

My impression of Savannah then (as with other visits we have taken since to some parts of the American south) was a continuation of largely separate white and black communities within a larger community.

A final illustration from our visit:

At the Hyatt, which had a large lobby, atrium and staircase, I was in the habit in the early evening during our stay of going to the lobby for a smoke. One evening I watched a steady procession cross the lobby and up the stairs of young white couples arriving for some sort of annual ball. The next night: the same thing was repeated except all the young couples were black.

All in all the symbolism seemed apt.


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previous columns & blog archive:
to access columns and this blog's archive, the links to which
are listed chronologically in the margin beside each column
as it appears on the website, go to
a recent column and use the links

to set a 'Google Alert' for RickardsRead columns
in order to receive automatic notice of new columns
as they are posted to, go to