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

[theinsuranceman]

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

If I thought AM Best ratings were more important than passing the requirements of the State Dept. of Insurance I'd be writing some where else. I do have a choice. I can say whatever I darn well please...lol.

 

[rousemark]

If I thought AM Best ratings were more important than passing the requirements of the State Dept. of Insurance I'd be writing some where else. I do have a choice. I can say whatever I darn well please...lol.

Just remember, EVRY company that folded passed the state DOI requirements.. They did not all have Best ratings..

 

[scagnt83]

I would be much more worried about a DB being tied up in an insolvency vs. an E&O claim with FE policies.

Yes, FE benefits fall within the SGA limits, so theoretically there should be nothing to worry about.

But in the event of a true insolvency, there is no guarantee of a timely payment of benefits owed, if I am not mistaken. It varies by state, but even the national website talks about limited payments during a true insolvency that the state actually has to take ownership of.

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I am no E&O expert. But I guarantee you there are E&O claims against FE agents. Especially considering some of the shadier outfits in the industry.

Low-mid level lawyers will get involved in lawsuits for $10k settlements. (thats a $2k-$3k payday if taken on contingency)

$10k is well within cumulative premiums paid, or DB changes on FE policies.

 

[shonceman]

I would be much more worried about a DB being tied up in an insolvency vs. an E&O claim with FE policies.

Yes, FE benefits fall within the SGA limits, so theoretically there should be nothing to worry about.

But in the event of a true insolvency, there is no guarantee of a timely payment of benefits owed, if I am not mistaken. It varies by state, but even the national website talks about limited payments during a true insolvency that the state actually has to take ownership of.

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I am no E&O expert. But I guarantee you there are E&O claims against FE agents. Especially considering some of the shadier outfits in the industry.

Low-mid level lawyers will get involved in lawsuits for $10k settlements. (thats a $2k-$3k payday if taken on contingency)

$10k is well within cumulative premiums paid, or DB changes on FE policies.

When Settlers was taken into receivership in the '90's, I had several pending policies that were declined all at once. It was a surprise to me, so I called agent support. They explained the situation, and then had me speak with the receiver for the questions they couldn't answer. Among other things, he told me claims were being held up while they sorted everything out. I remember asking if they would get paid eventually, and his answer being something along the lines of "We'll do our best, but no guarantees." As far as I know, no claims were denied, but just the thought that they could be was extremely disconcerting.

 

[titeye]

I'm curious....
AM Best and Standard and Poor's, supposedly are the reputable sources when it comes to determining the financial strength of a company. Considering most FE companies are privately held and not required to provide any information pertaining to their financial position, cash flows or income to the public, from where are these 2 agencies obtaining their information to render such an opinion?

 

[scagnt83]

I'm curious....
AM Best and Standard and Poor's, supposedly are the reputable sources when it comes to determining the financial strength of a company. Considering most FE companies are privately held and not required to provide any information pertaining to their financial position, cash flows or income to the public, from where are these 2 agencies obtaining their information to render such an opinion?

The carrier provides the info to the ratings agency. The agency has standards for the info provided, often requiring it to be audited by a registered accounting firm. They also use the financial documents carriers provide to state regulators annually.

 

[rousemark]

The carrier provides the info to the ratings agency. The agency has standards for the info provided, often requiring it to be audited by a registered accounting firm. They also use the financial documents carriers provide to state regulators annually.

And, the carrier pays the agency for the rating..

 

[scagnt83]

. Among other things, he told me claims were being held up while they sorted everything out. I remember asking if they would get paid eventually, and his answer being something along the lines of "We'll do our best, but no guarantees." As far as I know, no claims were denied, but just the thought that they could be was extremely disconcerting.

One thing that stood out in SCs SGA website was this part of the FAQ:

11. How long will I have to wait to receive payment of my claims and other benefits?

The courts may suspend payments due to you in order to sort out the affairs of the financially troubled company. It may take several months before the records are available to us. It is also possible that there may be little or no delay in getting benefit payments to policyholders.


Several months is no different than assets having to go through probate court. It takes away one of the key advantages of life insurance.

Imagine selling a policy based on not having to do a go-fund-me page for funeral costs... and then the family having to do a go-fund-me because of carrier insolvency? Not a fun phone call. Especially when they ask you why you didnt sell them a carrier with an A rating or better when those options existed... comp isnt as good perhaps...

 

[rousemark]

One thing that stood out in SCs SGA website was this part of the FAQ:

11. How long will I have to wait to receive payment of my claims and other benefits?

The courts may suspend payments due to you in order to sort out the affairs of the financially troubled company. It may take several months before the records are available to us. It is also possible that there may be little or no delay in getting benefit payments to policyholders.


Several months is no different than assets having to go through probate court. It takes away one of the key advantages of life insurance.

Imagine selling a policy based on not having to do a go-fund-me page for funeral costs... and then the family having to do a go-fund-me because of carrier insolvency? Not a fun phone call. Especially when they ask you why you didnt sell them a carrier with an A rating or better when those options existed... comp isnt as good perhaps...

But using an A rated company is no guarantee that they won't end up with having to have a GoFundMe for the funeral expense.. There were plenty of A rated and even A+ companies that went under during the turbulent 80s and 90s.. In that case, you end up asking yourself, "Why didn't I put it with a smaller, regional unrated company that sis till doing just fine."

Both Executive Life and Mutual Benefit Life enjoyed Best's top ratings. Mutual Benefit was even known as the "Tiffany of Insurance Companies" Both failed.

You can write with an A company today and then they can be downgraded tomorrow.. Then what? And, BTW, does E&O base their decision on what the company rating was when the app was taken or at the time of the claim?

 

[scagnt83]

But using an A rated company is no guarantee that they won't end up with having to have a GoFundMe for the funeral expense.. There were plenty of A rated and even A+ companies that went under during the turbulent 80s and 90s.. In that case, you end up asking yourself, "Why didn't I put it with a smaller, regional unrated company that sis till doing just fine."

Both Executive Life and Mutual Benefit Life enjoyed Best's top ratings. Mutual Benefit was even known as the "Tiffany of Insurance Companies" Both failed.

You can write with an A company today and then they can be downgraded tomorrow.. Then what? And, BTW, does E&O base their decision on what the company rating was when the app was taken or at the time of the claim?

You would have to read your E&O policy. I think they base it on time of sale. Its not like we can predict the future. But I guarantee you they stipulate it with the wording in your policy somehow. HOPEFULLY its time of sale. lol

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I personally try to go by S&P. They are much stricter than AM Best.

Currently, S&P has ZERO life carriers rated as AAA. I think there were just 2 rated AAA to start 2020.

AM Best has around 15 rated as A++ right now.

There are big difference between the ratings systems.

Fitch only has 8 AAA rated carriers. Moodys only has 5 Aaa rated carriers.

So obviously AM Best is more lenient with their top rank than the other big 3 rating agencies. With S&P being the most strict.