Picking the Right Company

[DHK]

The companies you have experienced slow to pay claims -- and that comes from low ratings -- what do you attribute that to?

Less capital reserves.

And many do it by design. When I was on a webinar with a B rated annuity company, they had one of their actuaries on to discuss their products. I brought up their ratings being a concern. His response was simply "If we felt the need to have more reserves, we'd do it."

Of course, if they did that, they couldn't offer the contracts they do because they are buying their business with the promises they offer... that A- rated and above companies can't offer.

I still haven't found a good reason to offer a B rated company's contracts... yet. Maybe for someone who has limited money and wants to shoot for the moon... but that usually isn't the kind of person I deal with.

 

[Newby]

NYL pays claims almost instantly for what it's worth but I agree with everything here.

The best measure is the real-world experience of actually processing a lot of claims. And even that can change as company philosophies, employees, management etc. change.

NYL does as most companies do. They require a certified death certificate first. Then they start the process.
Many companies pay the claim over night with no death certificate needed.
Homesteaders Life leaves check books in the funeral home for funeral homes that sell their policies. No one is faster than them.

 

[DayTimer]

The #1 fastest paying company there is has to be Homesteaders Life.

I've sold a lot of Lifeshield over the past 7 years. My persistency is near 100%. I am in the middle of my first death claim with them ever and I am embarrassed before the widow for how long it is taking them to pay the claim on her husband's four-year-old policy.

Not sharing to make a point. Just sharing.

 

[PrivClientSG]

Less capital reserves.

And many do it by design. When I was on a webinar with a B rated annuity company, they had one of their actuaries on to discuss their products. I brought up their ratings being a concern. His response was simply "If we felt the need to have more reserves, we'd do it."

Of course, if they did that, they couldn't offer the contracts they do because they are buying their business with the promises they offer... that A- rated and above companies can't offer.

I still haven't found a good reason to offer a B rated company's contracts... yet. Maybe for someone who has limited money and wants to shoot for the moon... but that usually isn't the kind of person I deal with.

That's BS. Ratings has nothing to do with how quickly a life insurance company pays claims. I've paid $25mm and it was less than three weeks, and I've paid $1mm and it took three months. Ratings had nothing to do with it. Come on now, this is such a nonsensical discussion -- ratings and paying claims. I've also had $18mm inside the contestable period, very unique and questionable death (extremely rare as it was H&W), and the company paid it in three weeks. A second company had $250,000 of coverage in place and it took two and a half months. No rhyme or reason, LOL.

A life insurance company pays their death claims based upon the claims process, the time it takes, getting all the outstanding requirements, etc. -- and it has nothing to do with how much is in their capital reserves. Every A rated company, and B rated company, and every other life insurance company -- all have the money to pay the largest death claim on their books. They don't pay the death claim slower because they don't have the money, don't have enough, don't have access to it, and so on.

 

[DHK]

Um... my post was talking about how B rated annuity companies offer very outrageous promises that A- and above rated companies cannot offer.

It had nothing to do with life insurance death benefit and paying claims.

 

[PrivClientSG]

Um... my post was talking about how B rated annuity companies offer very outrageous promises that A- and above rated companies cannot offer.

It had nothing to do with life insurance death benefit and paying claims.

Yes, I get it. This entire discussion is misplaced and misguided. I was speaking to the capital reserves vis a vis the claims paying ability and the speed at which they pay. It's BS.

 

[scagnt83]

From an academic standpoint, ratings should not impact the claims process.

However, real life is not the classroom.

I have never experienced a difficult death claim, but the lowest rated carrier I sell is an A. Id say 80% of my life book is with A+ rated carriers.

But I have heard stories from agents and consumers who had horrible experiences.... most of the bad experiences Ive heard about were with low rated carriers.

That does not mean the carrier had insufficient funds to pay the claim. It just means they did everything they could to hold on to those funds for as long as possible.

And that does not mean every low rated carrier does that. But the really bad stories Ive heard, were all with low rated carriers.

Ive also heard of "negative" experiences with well rated carriers, but that has always been over admin type of issues that the client just did not understand why, or a contestability related reason in the first 2 years.

Just my professional experience.

 

[PrivClientSG]

I've paid an exorbitantly large number of death claims, in part because of my marketplace (estate planning, demographic, etc.), and also because because I took over a book of business from a seasoned, veteran GA who passed away. His client make up came from an almost 50 year career, so there was a high percentage of elderly, advanced ages, etc.

That said, like many others, I've heard horrible experiences -- none of which had to do with the company's financial situation -- none! However, the horrible experiences were not limited to low-rated companies. I wouldn't argue that it happened, but I would argue that it was non-financial. Remember, aside from ratings -- even low-rated companies, ALL COMPANIES -- have reserves. I will not enter into the fray of the different reserves, what is guaranteed, what is not, what is statutory, what is not, and so on and so on. As scagnt83 pointed out -- not every low-rated company "does that" (delay paying claims).

Most of my business is direct (with carriers), or I have designated point-people at a GA, speciality shop, etc. I have PPGA contracts with certain carriers, and deal with them direct. I have others where I may go through a GA, specialty shop, etc. -- but most of the time, I am included in email communications. I can't say I found one time where a company overtly delayed paying a claim because of a financial reason or issue. Reason? Well, I could surmise . Issue? No. Period.

I also feel there is a misunderstanding of how death claims impact a life insurance company, vis a vis how their reserves really work, how they work, and how and why they are funded, etc. But, that's a discussion for another time, and as I said, a discussion where I will not enter the fray, LOL. Thanks!

 

[Deborah Armstrong]

That's BS. Ratings has nothing to do with how quickly a life insurance company pays claims. I've paid $25mm and it was less than three weeks, and I've paid $1mm and it took three months. Ratings had nothing to do with it. Come on now, this is such a nonsensical discussion -- ratings and paying claims. I've also had $18mm inside the contestable period, very unique and questionable death (extremely rare as it was H&W), and the company paid it in three weeks. A second company had $250,000 of coverage in place and it took two and a half months. No rhyme or reason, LOL.

A life insurance company pays their death claims based upon the claims process, the time it takes, getting all the outstanding requirements, etc. -- and it has nothing to do with how much is in their capital reserves. Every A rated company, and B rated company, and every other life insurance company -- all have the money to pay the largest death claim on their books. They don't pay the death claim slower because they don't have the money, don't have enough, don't have access to it, and so on.

Why is it that some of you are so hung up on "Ratings has nothing to do with how quickly a life insurance company pays claims." Nobody has ever said that. What was said is that the risk is higher for a lower rated company to be able to pay the claims. The stronger the financial stability the more likely they are to pay their claims in a timely manner. It is a correlation not a causation. We aren't talking about the process. We all understand the process that is not the point.

 

[PrivClientSG]

Why is it that some of you are so hung up on "Ratings has nothing to do with how quickly a life insurance company pays claims." Nobody has ever said that. What was said is that the risk is higher for a lower rated company to be able to pay the claims. The stronger the financial stability the more likely they are to pay their claims in a timely manner. It is a correlation not a causation. We aren't talking about the process. We all understand the process that is not the point.

I'll reply since you quoted me. First, you stated, "the risk is higher for a lower rated company to be able to pay the claims." Just to clarify -- you are actually saying that the risk is higher, for a lower rated company, to NOT be able pay claims. Right?

That said, I see you now speaking to two distinct and separate issues -- one being how quickly, and two, ability (specifically, in the post above you say, "to be able to pay the claims.")

For the former, the primary reason I am "hung up" on "how quickly" is because ratings has nothing to do with how quickly a life insurance company pays claims. Period. You can connect those "financial" dots if you so wish, or if you believe a connection exists. However, there is no factual quantification, formulaic equation or value, or any financial representation that has to do with how quickly a life insurance pays a claim, is more likely to pay it faster, slower, etc. Other than your logic flow and personal opinion, show me the factual proof on lower rated companies paying slower, being more likely to pay slower, or whatever theory you are purporting.

Now, as far as your statement, "the risk is higher for a lower rated company to be able to pay the claims." -- again, a lower rated company being more likely to NOT be able -- that speaks to ability. I have one simple question...Are you serious? You believe that a lower rated company may not have the ability to pay a death claim?

Have a great holiday weekend everyone!