Inquiring Agents want to know ... FE Carriers and Financial Strength

[shonceman]

Lol...no. I've seen that movie a bunch of times because I like it.

Without giving too much away for others, everyone kind of loses.

Yup. But I bet you don't know what happens after the end of the movie! The family hires another lawyer and goes after the agent that wrote the policy. Of course, his E&O is worthless since it was a non-rated carrier.

 

[theinsuranceman]

On Fe its irrelevant . There's so little cash value . It's a death policy and all that matters is the claim is paid and it will .Few co's from Family benefit to snl or kskj are am best rated.

You're right. One day Settlers is rated A- and the next day it's in receivership. AM Best doesn't mean anything. Just like the BBB. Pay an annual membership due and they'll say nice things about you....even if you're in financial trouble.

However, being able to pass the qualifications of each state dept. of insurance is all that really matters.

 

[rousemark]

In one of the Colorado Bankers threads, @scagnt83 said the following:

It is a fact that many of the carriers that offer Final Expense, aka Simplified Issue Whole Life contracts are not rated by any of the financial ratings agencies. When I first landed here about 5 years ago or so, using "A" rated carriers seemed to be advoctaed by several forum participants. But now, the issue of financial stability and creditworthiness seems never to come up when speaking final expense.

So, let's talk about ratings ... should we continue to write for companies that have not been vetted by a 3rd party such as AM Best, S&P, etc?

Do you know if your E&O will cover you for a claim with a carrie not rated A or higher?

How do you feel about financial strength ratings? Do they affect your carrier selection or not at all?

David, it is according to which horse they are riding on a given day. The FE producers that used to make a big deal over having A ratings are now writing for non rated and B rated companies so apparently they changed their minds on the importance of ratings LOL.

 

[HoosierLife]

I guess I am wondering what happens if a carrier fails due to malfeasance (embezzlement, fraud) and the agent has 100's of policies with that carrier.

I guess I don't really know exactly what E&O is for then when it comes to FE, and yet the majority of FE carriers require it, even if the agent is only appointed for FE.

Imagine agents who have a book of business with Colorado Bankers. Is this not going to be an issue for them as well? Maybe not.

Most of the FE only companies don't require it.

 

[Tahoe Ray]

Most of the FE only companies don't require it.

Having E&O is like having an umbrella policy.

It's fairly inexpensive, and you're unlikely to ever need it.

But when someone files a lawsuit against you, oh boy are you glad to have it.

 

[DayTimer]

Most of the FE only companies don't require it.

Yeah, and the problem probably won't come from the FE side. The problem will come from the annuity side. So I may not mind writing FE with an unrated carrier, but this gives me pause when using them for an annuity, and perhaps even a MEC policy.

But when someone files a lawsuit against you, oh boy are you glad to have it.

All it takes is a lawyer who is willing to put in the time to define a "class" and things can go sideways.

 

[rousemark]

Hmmm...good point. The lawsuit in "The Rainmaker" was against a debit company, wasn't it? (The lawsuit wasn't about life insurance, though. It was about a cancer policy. @rousemark , you oughtta think about that!)

The setting was in Tennessee.

 

[HoosierLife]

Having E&O is like having an umbrella policy.

It's fairly inexpensive, and you're unlikely to ever need it.

But when someone files a lawsuit against you, oh boy are you glad to have it.

I wasn't recommending agents go without E&O. I'm just still asking, has there ever been a lawsuits filed for a FE policy where the E&O is necessary?

The only reason I can think of why carriers wouldn't require it, is that they know their agent demographic (broke, brought in by some MLM recruiter) and they likely will never need it.

Now, I'm not taking any chances and even when I was broke, I had E&O. I'm just saying it is a moot point in the FE niche.

Who's gonna sue? FE clients beget younger FE prospects, who are just as broke as their parents.

Sure, they have an attorney on retainer just for these types of instances, just like they have their policy locked up in a safety deposit box downtown.

Now, I'm playing devil's advocate here. We always made sure agents had to pick up at least one carrier that required E&O. If they balked at that, how in the world were they going to buy leads??

Were they really serious business owners?

But I know plenty of HUGE agencies that purposely contract agents with companies that don't require E&O or have worked out deals with big name carriers so that even if it's normally required to have E&O, their distribution is exempt.

Now, at the end of the day, it's the agent that gets screwed if an E&O claim is filed, but I would think any attorney worth their salt would follow the money up the hierarch chain.

So, if these big IMOs don't seem to care, maybe this doesn't matter in the FE world?

 

[theinsuranceman]

David, it is according to which horse they are riding on a given day. The FE producers that used to make a big deal over having A ratings are now writing for non rated and B rated companies so apparently they changed their minds on the importance of ratings LOL.

Or those agents have left the business. I've always said the importance of E&O and AM Best, etc. are overly exaggerated when talking about the FE arena.

 

[rousemark]

Or those agents have left the business. I've always said the importance of E&O and AM Best, etc. are overly exaggerated when talking about the FE arena.

Not that I disagree with you Greg but you have no choice but to say that since the only company you represent is unrated..