X-Message-Number: 3000
Date: 20 Aug 94 01:53:00 EDT
From: Michael Riskin <>
Subject: CRYONICS:Insurance

   There has been discussion on the net recently concerning the
desireability of cryonics organizations offering life insurance
to it's members. Mike Darwin made strong supportive arguments in favor
of cryonics organizations taking on this risk/ reward endeavor including
his estimation of the relatively low risk involved and high fiscal
desireability. In contrast, Derek Ryan indicated some trepidation in
taking on an endeavor of the magnitude of member life insurance focusing
on the risk factors. For a complete reading of their informative postings
see cryonet messages # 2990 and 2993.  
  
  There are a few additional factors I wish to mention. The profitability 
of life insurance as a business and the ease of risk assessment, is not
as quite as clear, in my opinion, as Mike Darwin suggests.  Most insurance
companies maintain a complete underwriting department to evaluate new
policies. This consists of highly paid personnel such as actuaries, and
sophisticated computerized EVA analysis (economic value added) to attempt
to *predetermine* the profitability of each policy *before it is sold*, in
addition to such necessary professionals as medical and nursing personnel
that Mike Darwin refers to. (EVA is a *projective* cost accounting on a
policy by policy basis system, as compared to traditional *historical* cost
accounting). Besides the in house capability, they also keep under contract
independent risk analysis consultants at high volume-low cost advantage.
Additionally, some leading edge insurers have contracts with centralized
specialty testing labs that perform additional tests on blood, hair and
other samples as initial data gathering dictates. And then, all this
independently collected data, needs to be viewed as consistent or
inconsistent with the medical records gathered also at expense from the
customers personal physicians. Simply having access to the prospective
insureds medical records is also not a guarantee against relying on
misleading information. Membership in the national data banks is
also desireable to screen and analyze applicants, also at expense. And, it
is recognized that an effective risk analysis program is not meant to
exclude business, but to actively find profitable business. The money
currently required for suspension funding by cryonics organizations is
sufficiently high to warrant this extensive analysis by insurers.

  This entire risk analysis process has a high upfront cost factor, spread
out over many policies eventually sold, along with those rejected.
They depend to a degree on the prescreening ability of qualified
insurance agents to eliminate the cost of evaluating non insurable
customers. Even the initial evaluation process by a paramedic or nurse is
more sophisticated than it appears on the surface. When a representative
is sent out to draw blood, take BP, height/weight and the history etc,
from a prospective customer, there is also a trained, purposefully
"casual" personal observation and interaction taking place. The field rep
listens for signs of possible necessary followup in addition to the
standard tests. Customer credibility is a critical issue. For example,
smoking is asked about. The rep may offhandedly watch for the response
after mentioning that nicotine shows up in hair samples for a very long
time after asking the "do you smoke?" question. Similiar observations are
made re the drug use questions, and "casual" conversation. The notes
about these and other aspects of the field screen are reviewed for
possible additional testing all at small or great expense to the
insurance company. Such costly tests as a treadmill are sometimes
required, or a PSA, and the decision to bear the expense for those are
also based on less than hard evidence. This is a highly sophisticated
psychological and medical evaluation. And, with all of that, the insurer
then has to determine a competitive premium (they do not want to lose the
customer after all that cost), at either preferred, standard, or rated
premiums. And, insurers will also, after all that careful analysis,
possibly choose to use reinsurers as a means of spreading risk. Finally,
death claims need to be examined, and investment strategies utilized that
cover the death benefits and cash values if appropriate, in addition to
creating the profits.  And, the insurers continue to try to improve the
risk analyis/ profit process. An infrastructure of administrative and
customer service resource must also be maintained at some expense.

  The point of all of the above, is first, that I do not currently see any
cryonics organization having sufficient economy of scale to undertake the 
necessary up front risk analysis expenses or cover the overhead of
administering to its' insureds. I believe it is far more involved, costly,
and requiring far more trained personnel and sophisticated accounting to
do the job properly than the spare time of a cryonics medical director,
RN's, and outside contractors as Mike Darwin suggests.   
 
 But, even more importantly, I believe the absolute first responsibility
of any cryonics organization is to care for the resources and welfare of
it's patients. If a cryonics insurance company is connected in anyway to
the long term storage company, where this real and potential risk,
expense and loss can affect the patients, it is unacceptable to me. If the
insurance company is completely independent as a corporate entity, it then
becomes less clear as to how the *possible* profits positively enhance
cryonics endeavors.  Besides all else, it is a well taken business
observation that an entity should stick to what it knows how to do. There
are very good business reasons why the largest of publicly held enterpises
choose not to self insure, but rather look for the best available deal 
from vendors. 

  Now, with all of that , do I unequivocably reject the idea? No I do not.
As we grow, and develop appropriate resources of a financial,
administrative, and technical nature, there may emerge great potential for
us. We are a small band of visionaries, and I believe we are better served
by pursuing suspension, storage, and reanimation progress with our current
resources than profits from life insurance for now.
 
Michael Riskin, C.P.A., Ph.D., Director and Treasurer of Alcor, speaking
solely for himself and not representing an official view of The Alcor Life
Extension Foundation.



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