American Community Retreating?

[YouGotMyMoney]

ABC----

Aren't you concerned about another agent coming behind you and flipping your clients? I know, I know....that's always going to be a concern, but when you sell a C rated carrier, aren't you handing your competition a fully loaded weapon pointed at your head?

 

[ABC]

ABC----

Aren't you concerned about another agent coming behind you and flipping your clients? I know, I know....that's always going to be a concern, but when you sell a C rated carrier, aren't you handing your competition a fully loaded weapon pointed at your head?

You make a valid point on the group side. I have decided not to sell their group product any more.

On the individual side another agent is going to have a hard time switching a current member. The fact in my state they are not covering mental health has been huge in reducing premiums for people. I am talking 25%-35% reduction.

In this economy it would be tough to get someone to pay more in premium.

My rebuttal about the C+ is AC still has $99 million in reserves. If that should drop to under $70 I will be forced to move everthing.

 

[Crabcake Johnny]

So you'll disclose to your future clients that AC's rating just dropped to C+ and let them decide if they feel like rolling the dice?

 

[somarco]

No doubt price sells . . . and along with it, reduced benefits. Aetna doesn't cover DAMN claims either which contributes to a lower rate. Perhaps Georgia is unique in that carriers are allowed to decide if they want to cover DAMN claims as a standard feature or a rider. The few that include DAMN in all policies also offer a buy up that adds 40% to the premium if you want what amounts to mental health parity.

If we have any C rated carriers offering coverage, I am not aware of it. Do what you wish, but personally I would be concerned about a carrier that is jettisoning some of their business, laying off 12% of their staff, essentially saying they don't want any more individual business come 1/1/10 and has a negative outlook per A M Best.

In spite of reserves, it seems like they are in a death spiral and hanging on by their fingernails. Most carriers are either holding firm or advancing in the wake of potential health insurance reform. Some, like Coventry, have shot themselves in both feet and probably will be out of the market in 2 years (my opinion).

 

[Crabcake Johnny]

Agents need to detach themselves and stop adopting a pet carrier. Our job is to compare and advise.

In my state GR doesn't cover reproductive disorders during the 1st six months. How do I feel about that? It's irrelevant since my job is to point it out and compare.

 

[ABC]

So you'll disclose to your future clients that AC's rating just dropped to C+ and let them decide if they feel like rolling the dice?

I have no problem disclosing any information on any product that I sell. I make it point to look at reserves of every regional carrier that I sell.

Enron had a A+ rating when they went down
Conseco had A+ rating before the filed for Chapter 11
We could talk about recent companies.
What was A+ life carrier that had the GOV bail them out.
Oh yeah it was AIG

No doubt price sells . . . and along with it, reduced benefits. Aetna doesn't cover DAMN claims either which contributes to a lower rate. Perhaps Georgia is unique in that carriers are allowed to decide if they want to cover DAMN claims as a standard feature or a rider. The few that include DAMN in all policies also offer a buy up that adds 40% to the premium if you want what amounts to mental health parity.

If we have any C rated carriers offering coverage, I am not aware of it. Do what you wish, but personally I would be concerned about a carrier that is jettisoning some of their business, laying off 12% of their staff, essentially saying they don't want any more individual business come 1/1/10 and has a negative outlook per A M Best.

In spite of reserves, it seems like they are in a death spiral and hanging on by their fingernails. Most carriers are either holding firm or advancing in the wake of potential health insurance reform. Some, like Coventry, have shot themselves in both feet and probably will be out of the market in 2 years (my opinion).

That 12 % of the work force with AC is the large group division. It also consists of directors that did I don't know what. The 12% is less than 50 employees.

Death spiral is very possible.
That is why if you are selling a regional carrier you better dam well know what their reserves are.

I am very concerned about AC but I will continue to sell their individual product because they are still paying claims and its saving money for my anti depressant clients.

 

[Crabcake Johnny]

So here's my question to you: If you were a financial advisor but instead of Enron remaining A rated they instead got downgraded therefore giving warning that they were in financial trouble would you have still recommended them to your clients?

So your statement is "well typically there's no warning when clients get burned but now that I have that warning screw it, I'm still gonna sell it?"

 

[TXINSURANCE]

The Unicare block is (as I understand) melding in to Anthem/Wellpoint but that is a unique situation.

Incorrect. Anthem / Wellpoint is not in TX, IL or MI.

They are being offered guaranteed issue "special" rate policies with the Blues of their respective states, these blues are "not for profit" and not owned by Anthem / Wellpoint.

You were close though!

 

[ABC]

So here's my question to you: If you were a financial advisor but instead of Enron remaining A rated they instead got downgraded therefore giving warning that they were in financial trouble would you have still recommended them to your clients?

So your statement is "well typically there's no warning when clients get burned but now that I have that warning screw it, I'm still gonna sell it?"

Did you not read any of my posts?

The fact that I know the reserves of the carriers I sell is important.

Can you even tell me the reserves of any of your carriers without looking it up?

Know your carriers and then you can determine if they are good to sell. I have full confidence in AC unless their reserves drop under $75 or so million.

Do you even understand how reserves work?

There is a Premium, Claims, Reserves equation that is used.

In short if reserves keep falling that means the company is paying more out than what they are taking in. You comprehend that right?

OK so here is AC situation
4 years ago they had $125 million in reserves now they $99
That means they are losing $6.5 million a year.

So if they continue to lose $6.5 million a year the reserves will be at $80 million in 3 years.

At that point the company will have to completely restructure to save it.

I spend a lot of time with all of my carriers that I sell.

 

[somarco]

Not trying to belabor (or belittle) the point, but I have a great deal of experience on the carrier side and have read a lot of reports on premiums, claims, reserves, trending, PLR, IBNR reserves, etc.

Most health carriers do fine as long as their premium base is growing. Once it becomes stagnant or starts retreating they are in for a lot of trouble. If reserves are declining then a good chance premiums are as well.

You get into a snowball effect where premiums are dropping faster and faster and claims are no longer paid out of cash flow but from reserves.

You can't use a straight line interpolation to project reserve trends. It doesn't work that way. If their reserves have dropped 20% in 4 years they could easily drop another 20% in the next 12 months.

A M Best ratings on carriers that are predominantly health based don't bother me much since the formula's they use are mostly for life blocks. If the DOI puts a carrier on their watch list then it is time to worry.