Insurance Companies That Go Out of Business

Discussion in 'Senior Insurance Forum' started by brokerjojo, Feb 17, 2010.

  1. brokerjojo
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    brokerjojo Member

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    What happens to the policyholders and agents if an insurance company goes out of business or if it is bought by another company?

    I am wondering about med supp, ltc, and life ins. benefits.

    I am in Illinois. If a company goes under, does the state come in to help?

    What about our renewals. Are they lost or do we keep them.

    Thank you.
     
  2. Mark
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    Mark Well-Known Member

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    Just look at what happen to Shenadoah Life.


    If they are bought by another company, the new company also takes over the block of existing business.

    If they go out of business or get in trouble, then the "RESERVES" take over. Each state has a different reserve amount...
     
  3. Crabcake Johnny
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    Crabcake Johnny Well-Known Member

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    In most cases the state guarantee corp kicks in and pays the claims. And if the carrier goes out of business, yes, your renewals are history.
     
  4. moonlightandmargaritas
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    moonlightandmargaritas Well-Known Member

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    As a practical matter, most of the time the insurance commissioner will twist a few arms to get another entity to take them over.

    Close.

    Nearly every (if not all) states have a guaranty fund that will protect policyholders of life and health insurers in the event of an insolvency.
     
  5. DS4
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    DS4 Well-Known Member

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    I can tell you exactly how it will go down. Almost all my life carriers went into receivership in the late 80's, early 90's because of junk bonds.
    They were rehabed and sold.
    The state guarantee associations guarantee the life insurance policies, not the agents commission. You renewal commissions are the first expense the receiver cuts.
     
  6. Mark
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    Mark Well-Known Member

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    The agents always get the short end of the stick.

    Even companies that didn't go out of business will find a way to stop paying you the renewals.
     
  7. djs
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    djs Super Moderator Moderator

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    Closer....

    Most states have limits on what the guaranty fund will pay per policy/claim as well. This can become a bit of an issue in some larger life policies. The guaranty fund is a safety net, not a replacement carrier.

    Dan
     
  8. Frank Stastny
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    Frank Stastny Well-Known Member

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    With Med Supps your clients will be given a period of Guaranteed Issue so you will be able to move them to another company without having to ask them any health questions.

    When Continental Life sold to Genworth it was business as usual. I still receive all of my commission checks.

    I assume there is a reason for you to be asking that question. What do you know that we don't?
     
  9. brokerjojo
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    brokerjojo Member

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    No Frank, I dont know anything about any company going under.

    There are many companies that have been downgraded in the past year.

    Being independent, I would hate to lose some renewals if a company went under. I have always wondered how it would work if that happend.
     
  10. Newby
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    Newby Well-Known Member

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    Some companies don't participate with any state guaranty funds and are not protected by them.
    Knights of Columbas, Forresters, Woodmen of the World, and Royal Neighbors are 4 that come to mind.
     
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