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The Areivim "Life Insurance" Program
by Rabbi Yakov Horowitz

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5/17/10

Note to Our Readers:

The Monsey-based Areivim Program, led by Rabbi Shmuel Gluck, who is a regular contributor to this website, does extraordinary work with teens at risk and is not affiliated in any way with any of the three Areivim life insurance programs.

I warmly and proudly endorse the Monsey Arevim teen program -- as a resource for parents and as an excellent venue for your charity dollars.

Rabbi Yakov Horowitz

THE AREIVIM "LIFE INSURANCE" PROGRAM

Some Background:

From the moment I read about the Kol Yisroel Areivim “Life Insurance” Program, http://www.kolyisraelareivim.org., in which thousands of people form a cooperative group and contribute money via credit card to support the orphaned children of fellow members, I felt that this well-intentioned program pales in comparison to the protection offered by professional life insurance policies.

As a number of people have sought my advice regarding the Areivim plan, I thought it would be wise to commit my thoughts to paper and write a column about it.

Before doing so, I thought that it was only proper to reach out to the leaders of Areivim, inform them of my intentions, hear directly from them about the mechanics of the program, and ask them directly about the concerns I have. I posted an open letter on my website informing my readers of this plan, and received many responses from professionals in the field (actuaries, lawyers, and life insurance agents, among others)echoing my concerns and voicing additional ones.

The Director of the program, Mr. Yoel Bochner promptly returned my call and we had a very pleasant conversation about the Areivim program. We agreed that I would submit a list of questions and concerns, give him a few days to formulate a response, and then post my questions and his responses simultaneously on my website, and invite my readers to open a dialogue with him in a respectful and productive manner.

I was impressed by Mr. Bochner’s openness to the prospect of getting feedback, addressing the tough questions he may face from our readers, and possibly changing the way the program is run. We both felt that his organization will emerge from this process stronger and better positioned to serve the needs of our community.

Please find below the questions I posed and his responses to them.

I ask our readers to maintain a dignified tone in all comments that are posted on this thread. Hard questions are fine and in order, but in a Darchei Noam manner, please.

Thank you for your understanding and cooperation,

Yakov

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29 Iyar 5770

May 11th, 2010

Reb Yoel Bochner

Director, Areivim

Dear Reb Yoel:

Allow me to begin by thanking you and the other leaders of Areivim for your efforts to insure the breadwinners of our families and to avoid the dreadfully humiliating public campaigns for widow(er)s and orphans whose parent passed away r’l without life insurance.

Due to my first-hand experience with losing a parent at a young age, I have always had very strong feelings about the importance of parents having adequate life insurance to provide for their children in case chas v’shalom tragedy strikes. My father a’h was more than responsible in that regard, and his generous life insurance policy provided my mother ylc’t with the financial wherewithal to raise us with menuchas hanefesh and dignity throughout our formative years.

I would also like to thank you for your openness in permitting me to pose these questions to you. I trust that we can do this in a respectful and constructive manner.

Here are my questions/suggestions:

To begin with, both in your advertisements for the program and on your website there is virtually no information about the dedicated individuals who run the program. In a project like yours that relies so much on trust, it is critical that the public have this information. For example; who was the founder of this program, who manages the day-to-day operations, and who are the Board of Directors? Who are the rabbonim who will be overseeing the funds, who will be investing the money, and will the person making the investments and those running the program take a fee and/or commission for his/her efforts? I was a trustee and treasurer of a “yesomim” fund a generation ago and Reb Moshe Feinstein zt’l was our posek whenever we had questions (and there were many, many questions – with just one fund for one family), and Reb Dovid Feinstein ylc’t took over that role after Reb Moshe’s passing. Who is your posek? And what is the succession plan for your posek? For that matter, what is the succession plan for the leadership of Areivim; an important component for programs being set up that will operate for decades.

I found two Areivim websites http://www.areivim.info/ and http://www.kolyisraelareivim.org. Are they the same organization? They seem like two different organizations. Please clarify that.

Does Areivim have any mechanism for grievances – where does one go if he/she feels mistreated? Your website notes that Areivim is a “Project of the Va’ad HaRabbonim.” How involved are Va’ad members in the Areivim program and who are the rabbonim? I also saw that Kupat Ha’ir is a sponsor of Areivim. Is Kupat Ha’ir the same as Va’ad Harabbonim? Are they different Rabbonim than those on the Va’ad HaRabbonim? They seem to use the same advertizing format. Are they two organizations or one? Kindly clarify that as well.

Regarding the actual coverage of the insurance; do you consider Areivim’s benefits to be “guaranteed” or not? Is the Areivim program intended to replace or supplement commercial life insurance programs? In other words, do you recommend that people take life insurance policies in addition to Areivim or not? My reading of the rules indicates that if one’s children are covered by life insurance, there are no Areivim benefits paid. How does this work, and why are we punishing people for being responsible?

I found the financial model, which does not allow for much in the way of wiggle room, to be very unsettling to say the least, and I have no confidence whatsoever that you will be able to meet your obligations, despite your best intentions. A simple run of the numbers raises concerns. If there are 16,000 subscribers, the maximum amount of money you can raise in one year is approximately $5.4 million ($28 x 12 x 16,000 = $5,376,000). If you divide that by $100,000 (the benefit to each yosom or almanah) that means 54 beneficiaries per year. If you assume five beneficiaries per family (a relatively conservative estimate be’h in our population), that means that the program could only support ten deaths (c”v) per year. Is that a sound estimate? What happens if more than ten men (c”v) pass away in one year, if the average number of children is much higher than five, or if you are unable to collect the $28 per month from each of the members?

What happens if not enough people (16,000) are subscribed (how are people covered if there is less income)? Who is processing all the credit card transactions, and what happens when people cancel their credit cards, or can’t make payments because they lost their jobs? (I suggest that you ask the executive director of any yeshiva what percentage of tuition goes uncollected each year; and that is with a service being provided directly to their family.) Where in the budget is there money for all the ads and marketing? And if that is coming from your collections, there will be a huge hole when you need to make payments.

Each child is to get a $100,000 fund set up for the wedding expenses and until then checks are cut for interest or income from that fund. Well; if the money is invested in “safe” vehicles such as CD’s or treasury notes, we are looking at 2-5% a year – at best a few hundred dollars a month; which is basically milk money. And anything with a higher return involves risk. Is Areivim comfortable in investing where there are higher returns with more risk?

There is no mention of any professionals in your publicity. I consider myself to be moderately knowledgeable about life insurance – for a layman. But I wouldn’t dream of designing or overseeing a project like this because I am way out of my league. Have you consulted with a team of actuaries to crunch the numbers, a legal team to wade through the many legal issues (and there are many of them), accountants to determine the tax deductibility of donations (your contributors are getting a benefit after all) and how the payments will be made in a legal manner; the list goes on and on? And if these are questions raised by an am ha’aretz like myself, just imagine how many dozens of question would arise should you assemble the professionals noted above.

Then there is the whole issue of health and preconditions. Professional life insurance companies require medical exams. You ask for a written note than the members are in good health. Who determines that, in the event of a payout? Could you just imagine what a mess there will be when conflicts arise in this area? And the fuzziness of your criteria is a sure-fire recipe for confusion and conflict.

Finally, on a very personal level, as one who lost my father before my 4th birthday, I find the emotional ramifications of Areivim horrifying to say the least and it was this angle which motivated me to write these lines in the first place.

My mother once remarked to me that in addition to all the other components of the tragedy of my father’s passing, she felt that with his death she lost her privacy, as well intentioned people all around her felt free to comment on her personal life. Well; can you imagine how things would be if our family would have been supported by 16,000 credit card swipes? How would she have felt having to wait for someone in an office to cut her an interest check each month, and for a Rav to approve that each of her three children were destitute enough to warrant a $100,000 fund in his/her name? I was a very wild kid growing up and you know how cruel kids can be sometimes. Can you imagine being taunted in the playground about these financial matters after a fistfight?

Reb Yoel; to sum up, I got a headache writing these lines just thinking about all the complications of this program and the challenges that could arise. I cannot in good conscience recommend this program, and in the strongest terms recommend that parents take commercial life insurance. $28 per month should buy north of $500,000 of term life insurance that has security, privacy, and avoids all the complications noted above.

In many ways, your noble efforts remind me of what similarly well-meaning people did years ago with allegations of child abuse – turning their backs on a one-step solution that would have taken advantage of the “systems” in the general population (call the police) and instead created complicated mechanisms instead (a va’ad to oversee abusers) comprised of people with no training in the field. And you know how that one turned out.

I humbly suggest that you throw your efforts into assisting families in their efforts to purchase commercial life insurance along the lines of a very successful campaign currently run in BMG of Lakewood. It is my sense that balei batim will be glad to assist with this endeavor.

As we discussed, I am submitting this list of questions and concerns to you directly and privately in order to allow you time to formulate responses to them. Once I receive your response, I will post my questions and your responses simultaneously on my website and invite my readers to open a dialogue with you in a respectful and productive manner.

I give you my word that I will keep an open mind despite my concerns, and will weigh your responses carefully before I write a full essay on this subject which I plan on publishing in the near future.

It is my sincere hope that Areivim will emerge from this process stronger and better positioned to serve the needs of our community.

B’yedidus,

Yakov

MR. YOEL BOCHNER’S RESPONSE

Dear Rabbi Horowitz,

We are grateful for your interest and the insightful points you raise, and appreciate the opportunity to respond and dispel some of the misconceptions and confusion surrounding our work.

Your reputation as someone who works tirelessly for progress and change in our community, refusing to accept 'because that's the way it always done' as a reason for stagnation, makes us confident that, if you take the time to study our plan, you will share our vision.

In addition, your touching personal note about your own childhood underscores the importance of what we're doing: sparing other humiliation and inconvenience

It would be cynical and unfair to assume that KYA is 'just another' activist organization when, in a sense, we have entirely rewritten the way things are done.

Not content with mere figurehead rabbinic figures, the rabbanim affiliated with us are involved, investing time, energy and heart in this project, one which has become a priority to them.

The rabbanim in question are representative of all the various streams within yahadus hacharedis, chassidim, litvishe, Sephardim and Ashkenazim.

Please note that the rabbanim to not 'endorse' us, or promise to daven for people who help us- they are us! Every single rov is already a part of- or will be a part of- our work and they are the prime catalysts for our success.

In America, the names of Rav Mechel Steinmetz and Rav Benzion Strasser on signed on to the account, and we have hundreds of other rabbanim in communities across America.

You see, Rabbi Horowitz, the rabbanim are our greatest allies because they know better than anyone else just how broken the old system was, and how workable this one is.

They are the ones that were faced with the bitter daily task of hearing the tales of pain from new almanos, the accounts of orphans in a home bereft of a breadwinner.

There was a time before people grew numb, when it was still possible to appeal to the masses and hope to touch their hearts; unfortunately, as tragedy followed tragedy, people- even in a nation of rachmanim- grew a little less sensitive to the relentless onslaught of tzaros.

The 'keren' system, in which the rabbanim formed special accounts for each needy family, was no longer an effective way to galvanize the people and raise the necessary amounts of money.

Rabbi Horowitz, you- correctly- mention the humiliation of the young orphans that are fully aware of their new status as 'wards of state'.

Imagine the shame of young children who are forced to 'pose' for the pictures that will be emblazoned on the walls and shuls of their hometown? Is there anywhere to run from such pain?

We came into being due to original and creative thinking by the rabbanim and askanim involved in these wrenching situations. You, Rabbi Horowitz, raise valid points about how it ought to have been done, in an ideal world, but these dedicated individuals are working within the parameters of reality, well aware of the limitations of people.

You know the numbers- each head of family commits themselves to three dollars per orphan, in the sad scenario of a parent's death.

Three dollars per member – based on a group of 16,500 people in the group- per yassom equals fifty thousand dollars per child.

A lot of rules and regulations were put in place to assure that the system can work out.

The idea gathered steam, and in America- where, unfortunately, tragedy is no stranger- askanim wanted a similar program. The 'keren' system stopped working here as well, and the embarrassing newspaper campaigns, even those that attempt to maintain the anonymity of the recipient, often cause great collateral damage.

The lay leaders that created the American model felt that fifty thousand dollars per child was insufficient for this country, and changed the numbers- six dollars per child would equal one hundred thousand dollars per child. We were welcomed by the heads of virtually every single communal organization- Agudas Yisroel, Young Israel, Orthodox Union, Chabad and various other communities.

The terms and condition were drafted by a team of accountants and actuaries, working pro bono for a cause that was placed at the forefront of the communal agenda by rabbanim.

Rabbi Horowitz, before we delineate the details, allow us to respond to your overriding concern; why not get people to purchase conventional life insurance?

The question is a good one. Kol Yisroel Areivim is not an insurance policy and we encourage every person who can purchase a standard policy to do so. The more they invest, the more their families stand to receive in the event of tragedy, c'v.

Now, for the numbers. In order for a life insurance policy to really make a difference, it would need to provide a minimum $250,000.00 per child. This is based upon the need for $15,000.00 per year per child.

The maximum return on money, with no risk, is 2.5 per year, which means that the profit on $250,000.00 is $6,250.00 per year. The remainder of the money per child would need to come off the 'keren' for each of the ten years, and thus the 2.5 percent yield will decrease proportionately as well.

This option is an expensive one, and a great many frum families cannot afford the monthly payments in a budget weighed down by mortgage, food, tuition and car payments. Bear in mind that this type of policy is only for ten years and one would need to purchase it at a young age in order to get such a favorable rate.

As the age of a breadwinner increases, and health concerns arise, the price rises as well, and often those who need it most cannot afford it. In addition, so often the payout of several hundred thousand dollars is not nearly enough and then the families must resort to the benevolence of the community regardless.

As mentioned, Kol Yisroel Areivim fills a void not in theory- where everyone should have life insurance- but in practice, where many people do not. In fact, even if the deceased did have life insurance, but with a plan that gives less than one hundred thousand dollars per child, Kol Yisroel Areivim fills the gap.

The rabbanim and lay leaders at our head have drafted regulations that ensure that no individual has excessive power and to maintain accountability and fairness.

• The KYA Policy is open to all members of Klal Yisroel.

• All policies will be reviewed by a board of rabbanim and policy acceptance is contingent upon their approval.

• The rov of the shul where the deceased was a member, of a rov closely associated with the family, will oversee the transfer of funds and ensure that the needs of each individual child are met.

• The account is opened in the name of the surviving parents and the family rov, as well as a family guardian to ensure that the money is used or invested wisely.

• Kol Yisroel Areivim reserves the right to have applicants fill out a medical questionnaire that will determine eligibility. In the event that the questionnaire was filled out incorrectly, KYA reserves the right to terminate the agreement. Funds that were paid out must be refunded.

• Any issues that arise will be dealt with by the rabbinical board of KYA or its authorized arbitrator. Their decisions will be final.

• In the event of a member’s passing, the agreed-upon fees will be collected from the group's members. The funds will then be used to establish a trust for the children of the deceased. In the event that the group is complete ,with 16,500 members, the amount will be one hundred thousand dollars per child. If the group is incomplete, there will be a minimum payment of fifty thousand dollars per child

• The amount collected is $6.00 per orphan, with a maximum total of $288.00 per year.

• If the charge does not go through for a period of ninety days, membership will be terminated.

• The money should ideally be allocated for major expenses, such as tuition or marriage, but the rov assigned to the family will be the ultimate arbiter.

• Since this fund is meant as an opportunity give tzedaka, in a respectful fashion, to almanos and yesomim, no fund will be established for people that have life insurance in place, or a sufficient sum in cash/assets to render them ineligible of receiving communal assistance.

• Within the organization there is no single individual that has excessive control over the money.

• The office is run by five askanim that do the office and technical work,and each individual case is assigned one overseer from the central office. These people are efficient and knowledgeable and available to discuss any case or answer questions.

Obviously, there are others that wish to copy the success of our model, and it would serve the best interests of the klal if we could unite and join forces. For various reasons, this is not the case, however.

Our appeals are never based upon the drama of painting heartbreaking scenarios and thus using fear and guilt to convince the people. We much prefer to share the facts in an intelligent, clear fashion and respect the ability of people to make intelligent decisions.

Rabbi Horowitz, we are most grateful for your interest and for taking the time to study our plan and its benefits. Your willingness to ask hard questions is testimony to your concern for Klal Yisroel, and thus, it makes you a most fitting partner for our work. It is gratifying that there are people such as yourself that are realistic enough to recognize the potential problems, yet still hopeful enough to encourage positive change.

Respectfully,

Yoel Bochner



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