Barely seven weeks after the nuclear accident at the Three Mile Island power plant, Mutual of Omaha began an intensive sales campaign in the Harrisburg, Pa., area for what has become one of its hottest selling products: cancer insurance.
"You kind of hate to capitalize on something like that," says a Mutual sales manager in Harrisburg, who nonetheless confirms that his agents went door to door warning residents there that they may risk cancer because of radiation that leaked from the power plant.
The Mutual agents are not alone in their hard-sell tactics. In Charleston, S.C., residents recently opened personalized letters from a Pennsylvania insurance company telling them how many of their neighbors could expect to develop cancer.
"Mr. Smith, I don't have to remind you," a typical letter would say, "that Joan [Smith's daughter] or John [his son] may be one of these unfortunate people."
Thanks to blunt sales pitches like that and what some critics claim are miserly benefits, cancer insurane policies have become both an economic bonanza and a troublesome issue for the nation's insurance industry.
Although precise figures on the national sales of cancer insurance are not available, there is no doubt among the industry officials that the fears of skyrocketing hospital costs and mounting evidence that cancer-causing agents are widespread in the nation's diet have created a seller's market for the policies. Typically, cancer policies cost $40 to $150 a year and promise to meet many of the cancer treatment bills that can be beyond the coverage of other insurance plans.
But complaints about the policies are widespread. "It's one of the biggest frauds in the insurance industry," says Ralph Nader, the consumer advocate.
The Federal Trade Commission, in a recent policy paper, says buying cancer insurance, or any other policy specifically covering a "dread disease," is "more like buying a lottery ticket" than needed health protection. Even as a lottery the policies are "not a very good gamble," the FTC says.
Insurance firms offering the policies and some of their customers argue with that reasoning, saying they offer the promise of coping with the catastrophic costs of some cancer treatments. And, after all, says John Cooney, president of Union Fidelity Life Insurance Co., one of the major cancer insurance sellers, "everything has to be sold, no matter how meritorious the product is."
The states of New York, Connecticut and New Jersey disagree and have banned outright the sales of cancer insurance and other "dread disease" policies. Congressional hearings open Wednesday into the sale of insurance policies to the elderly and are expected to focus on the sales of cancer policies.
In Virginia, Maryland, and the District of Columbia, however, cancer insurance continues to flourish virtually unfettered by regulation. American Family Life Assurance Co. of Columbus, Ga., the nation's largest cancer insurance firm, claims 200,000 policy holders in Virginia, 23,000 in Maryland and another 23,000 in the District. The number of other cancer policyholders in the area is unknown to insurance regulators.
Nationally, American Family Life alone claims eigt million Americans now have its cancer policies and will account for most if its expected $400 million income this year. In 1977 the company received $170 million in premiums and paid out $73 million in benefits, giving it what Robert Hunter, a Federal Insurance Administration official, calls an "outrageous" profit.
American Family Life President John Amos, who created the company after reading the 1964 surgeon gneral's report linking cigarette smoking to cancer, says his is simply a good business.
"It was like McDonald's went into hamburgers," he says. "I was looking for my own little niche and I found it."
Amos, a lawyer who 25 years ago was proclaiming "God bless those who sue my clients," says his employes do not use are newspaper and broadcast accounts and American Cancer Society statistics about the perils of cancer.
The tactics of other salesmen can be more direct. "I'm selling it door to door," acknowledges a Mutual of Omaha agent in Harrisburg near the Three Mile Island (TMI) plant. "People are very nervous, very anxious about TMI." In the first week that Mutual pushed the cancer policies the agents easily sold about 100 policies there, the agent says.
One of the most blunt sales pitches has come from Union Fidelity Life Insurance Co. of Trevose, Pa. "If it takes you five minutes to read this brochure . . ." says one of their ads, "approximately six new cases of cancer were diagnosed" during that time.
The insurance fliers cite American Cancer Society figures, a point that troubles officials of the national charity. "They're using the fear of cancer to build one of the fastest growing businesses in the country," says Dr. William Markel, a Cancer Society executive. The Society urges the public to shun cancer insurance in favor of more comprehensive health insurance policies.
Most insurance executives say they disapprove of scare tactics, but some argue it's difficult to police an industry with so many sellers. "Agents have to eat every day," says Union Fidelity's Cooney. "Who knows what the agents are saying in the houses?"
Sales tactics aside, what troubles some cancer insurance critics is their payout of benefits. Large insurance firms typically return about 85 cents out of every dollar to their policyholders according to the 1978 edition of the National Underwriters Argus, an industry publication. But American Family Life Returned only half that amount - 43 cents in 1977 - the publication said. Some cancer insurance firms paid out 40 percent of their premiums or less, industry officials say.
Amos, of American Family, says the people who collect on his policies are many and points to Mary Judd, a 71-year-old Washington widow, as typical.
"I think it's wonderful," said Judd, who collected $3,000 after her husband died of prostate cancer in 1977. "My husband always said if we don't need it we're lucky and it we do need it we're lucky," she said. "That's the way I still feel."
In the parlance of insurance regulators, Judd was a "winner," someone that cancer insurance critics say is too infrequent in the industry.
An FTC policy paper criticized "dread disease" policies for their "fine print exclusions and unfair denials of claims."
Those who do collect often find the policy covers only a fraction of the costs of cancer treatment, which the American Cancer Society estimates averages about $20,000 "from time of diagnosis to cure or death."
Consider the case of Mildred F. Perrie, a 70-year-old widow living at 4204 Meade St. NE in the District. Her husband, Earl, a retired truck driver, died in September in Howard University Hospital of "bronchogenic carcinoma." A huge malignant growth had erupted through his chest wall, her lawyer says.
Perrie, who had taken out a cancer policy with Mutual Protective Insurance Company of Omaha, Neb., filed a claim with the company expecting to be paid approximately $100 a day for hospitalization, plus portions of her husband's surgery and home-confinement costs.
Instead the company refused to pay, invoking a provision of the policy that required a pathologisths confirmation of cancer, according to her attorney, Marc Botzin. Clinical observation - what the examining physician observes from symptoms and experience, rather than actual cell samples did not suffice, Botzin said.
Perrie had been pathologically diagnosed for cancer on his final of three visits to the hospital, the lawyer said. The company, after initially refusing to pay anything, offeered to pay for the costs of the third treatment, Botzin said.
After an initial offer of $2,000, Botzin told the company their policy was so restrictive as to be "unconscionable and unenforceable." He threatened to take the issue to court. The company quadrupled its offer and settled the claim, the lawyer said.
"I think the policy's a rip-off and they should be exposed for it," said Botzin.
Richard Norris, director of claims for Mutual Protective, said his company ultimately would have waived the provision requiring pathological confirmation of Perrie's condition. But he strongly defends the provision, calling it "a safeguard for the company," against false or unwarranted claims.
Perrie's problems, according to Dr. Alan Mondzac, chairman of the District Medical Society's cancer section, are not unique. "It's loophole in the policy and it's not rare," he said. The insurance company is just trying to find a way out. It's just not cricket." CAPTION: Picture, Insurance company promotions such as this are labeled by some as scare tactics.