AIG Insurance

[NHB_MMA]

You must be unfamiliar with statutory reserve requirements, non-forfeiture values and the general way insurance carriers operate and interact with the departments that regulate them.

In all the years that carriers have operated, no one has lost a dime in principle and all legitimate death claims have been paid per contract.

Guaranteed means exactly what it says . . . guaranteed.

Well, some companies have a mentality of not paying if they can in any possible way get out of it, but that's another topic and really not a reserves matter. Health insurance companies are better known for that than life companies.

I am not familiar with the specific reserve requirements. From what I have read, the interest bearing portion of a premium goes into a company's general account, if I'm not mistaken. That would lead me to think a company's management team and philosophy is a factor to consider. What am I missing here?

Why did Mutual Benefit lock the doors to the lobby if it's a sure bet that the money will be there for a policy?

There is absolutely no comparison of the companies referenced above vs. the insurance industry. None.

Enron folds and there are no reserves to cover obligations. There are no regulatory agencies to step in and protect the stockholders.

That is not the case with carriers & their policyholders.

True. It was an extreme example to reference those companies and really not applicable to the concerns we're discussing. I shouldn't have used such examples as the insurance industry has the regulatory agencies to keep such extremes from happening.

 

[NHB_MMA]

There are quite a few carriers that offer products that do not deliver good value to the consumer, and are mostly worthless when time comes to pay a claim.

Okay...that was the cue for the Merlin Olsen commerical.

 

[somarco]

I am not familiar with the specific reserve requirements. From what I have read, the interest bearing portion of a premium goes into a company's general account, if I'm not mistaken. That would lead me to think a company's management team and philosophy is a factor to consider. What am I missing here?

Quite a bit.

The general account is a very conservative fund where up to 70% of the reserve dollars are managed. Any xs can go into separate accounts.

Most of the reserve dollars are invested in things like real estate, bonds & govt securities. The general reserve dollars are not meant to be liquidated but rather allowed to mature & reinvest.

Life insurance is highly reserved depending on the product line. Sometimes 50-60% of the net premium is held in reserve. Health insurance has a reserve base around 20-25% of gross premiums.

There are statutory reserves as required by the DOI in the state where the carrier is domiciled. Anything above that is a claim stabilization reserve which can be invested in more liquid assets.

Carriers are audited every 2 - 3 years by the state DOI. More often if there is suspicion that the carrier is in trouble.

In addition to reserves, carriers are required to contribute a portion of their gross premiums to state guaranty funds. These funds are used by the DOI to pay claims that may not be covered by the operating capital of the carrier or liquidated reserves in the event the carrier goes into receivership.

Why did Mutual Benefit lock the doors to the lobby if it's a sure bet that the money will be there for a policy

Because policyholders are ignorant.