Shenandoah Life Sales Suspended

[Russ]

I had one of yours in Morristown call us yesterday-Hopkins. I think I settled her, but she was not too stressed to start with, just inquiring.

I've only had 3 calls on the booklet, so far. Had a friend/policyholder, stop me at the local Tom Thumb and ask me about it. I don't think folks understand what's going on...especially if they don't read it. Then again, all they have to do is google search Shenandoah Life and find stories of their $60-70 million-dollar loss. Over half of the policyholders I've got don't have a computer. Elderly folks that won't use them.

Maybe I should just print the chart below.....Freddie Mac's stock graph the last 5 years....and show it to policholders....that should explain it....

Still don't see how they survive this.

 

[Joe Moore]

I don't think folks understand what's going on...especially if they don't read it.

I talked to one lady this morning (yes, I was at the office on Saturday morning) that had read it twice. She still had no clue what it said. So, I am not sure reading the notice has anything to do with understanding what has happened. It is just so full of legal "facts", it is above most people's thought processes.

Most I have talked to have said, "tell me what has happened, so I will understand it".
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Still don't see how they survive this.

Here is the way one company, in worse condition, survived:
SCC Ends Receivership of Settlers Life; Fully RestoresAbility to Conduct Business of Insurance. | Insurance > Life Insurance from AllBusiness.com
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Maybe I should just print the chart below.....Freddie Mac's stock graph the last 5 years....and show it to policholders....that should explain it....

This may work, to a point. You can show them where around $50 million of Shenandoah's surplus has gone. The way I understand it, they still have left around $65 million in cash and $200 million in COMMERCIAL Mortgages. There has been no real problems in the Commerical Mortgage Markets, yet.

Of course Commercial Mortgages could get worse, if the economy does not recover.

 

[jacobtn]

I had one of yours in Morristown call us yesterday-Hopkins. I think I settled her, but she was not too stressed to start with, just inquiring.

Thanks Joe- I owe you one! If you are ever down this way let me know, I'll buy you lunch. I have gotten calls on my cell phone today from Shen clients all over TN and GA (my cell is on my business card). No one is upset, they are all just confused. I have instructed our office to not replace any of the business unless the renewals stop.

I do have one question. What about the policies we were advanced commissions on? If they go into liquidation, will they try to collect those back or just mark them as losses?

 

[Russ]

I talked to one lady this morning (yes, I was at the office on Saturday morning) that had read it twice. She still had no clue what it said. So, I am not sure reading the notice has anything to do with understanding what has happened. It is just so full of legal "facts", it is above most people's thought processes.

Most I have talked to have said, "tell me what has happened, so I will understand it".
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Here is the way one company, in worse condition, survived:
SCC Ends Receivership of Settlers Life; Fully RestoresAbility to Conduct Business of Insurance. | Insurance > Life Insurance from AllBusiness.com
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This may work, to a point. You can show them where around $50 million of Shenandoah's surplus has gone. The way I understand it, they still have left around $65 million in cash and $200 million in COMMERCIAL Mortgages. There has been no real problems in the Commerical Mortgage Markets, yet.

Of course Commercial Mortgages could get worse, if the economy does not recover.

$65 million in cash

Commercial mortgages, from Wikipedia......"A commercial mortgage is a loan made using real estate as collateral to secure repayment.
A commercial mortgage is similar to a residential mortgage, except the collateral is a commercial building or other business real estate, not residential property.
In addition, commercial mortgages are typically taken on by businesses instead of individual borrowers. The borrower may be a partnership, incorporated business, or limited company, so assessment of the creditworthiness of the business can be more complicated than is the case with residential mortgages."..............................


I know companies come back, but where they(Shenandoah Life), lost money is asking for 31 billion more. They need a buyer....they had one and they backed out....how often does that happen?

Suppose you have a young successful businessman...has a million-dollar term policy with you with Shenandoah. Is healthy...non-smoker....has had this policy for a few years. In Shenandoah's current state..."E" rated...is changing them to another "stable" company the right thing to do for the client? $65 million isn't that much.

I have quite a few elderly people insured with Shenandoah that were healthy when they applied, but are now failing in health. I've only had 1-2 death claims with Shenandoah over the 10 years I've written for them. Guess I'll find out soon how well they can still pay a death claim.

Had one policyholder with Shenandoah call last night and cancel his policy. He said from reading the booklet, he thought the company was..."about broke."

 

[Joe Moore]

And, the news continues:
Poor timing leaves insurer's future in doubt - Roanoke.com
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I do have one question. What about the policies we were advanced commissions on? If they go into liquidation, will they try to collect those back or just mark them as losses?

Who knows?

With the state in charge, it is not possible to predict what will be looked at. My thought would be if the policies were still on the books, the buying company would still have to honor the commissions.
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Suppose you have a young successful businessman...has a million-dollar term policy with you with Shenandoah. Is healthy...non-smoker....has had this policy for a few years. In Shenandoah's current state..."E" rated...is changing them to another "stable" company the right thing to do for the client? $65 million isn't that much.
quote]

Anything below the Guaranty Associations coverages, I really see no reason to do anything.

Anything above the Guaranty Association's limits, could become another line of thinking. I am not aware of any real guidance coming out. It is putting agents in a situation of no real answers. We probably need to look at this as to what would we recommend to our family members, and try to do the right thing for the client. I feel the smaller policies should be just fine.

If you replace a Shen policy, I would make sure I did a C.Y.A. One of our customers insisted on getting out of a Shen Med Sup Friday; on the replacement form I said the reason was "at the insistence of the client, due to the receivership of Shenandoah Life". I read her the reason, and she was in agreement this was the full reason.

If the client insists, to keep your business, I feel an agent has no choice except to do what the client requests and/or demands. I personally would fully document all the circumstances leading to the replacement.

 

[Russ]

And, the news continues:
Poor timing leaves insurer's future in doubt - Roanoke.com
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Who knows?

With the state in charge, it is not possible to predict what will be looked at. My thought would be if the policies were still on the books, the buying company would still have to honor the commissions.
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Suppose you have a young successful businessman...has a million-dollar term policy with you with Shenandoah. Is healthy...non-smoker....has had this policy for a few years. In Shenandoah's current state..."E" rated...is changing them to another "stable" company the right thing to do for the client? $65 million isn't that much.
quote]

Anything below the Guaranty Associations coverages, I really see no reason to do anything.

Anything above the Guaranty Association's limits, could become another line of thinking. I am not aware of any real guidance coming out. It is putting agents in a situation of no real answers. We probably need to look at this as to what would we recommend to our family members, and try to do the right thing for the client. I feel the smaller policies should be just fine.

If you replace a Shen policy, I would make sure I did a C.Y.A. One of our customers insisted on getting out of a Shen Med Sup Friday; on the replacement form I said the reason was "at the insistence of the client, due to the receivership of Shenandoah Life". I read her the reason, and she was in agreement this was the full reason.

If the client insists, to keep your business, I feel an agent has no choice except to do what the client requests and/or demands. I personally would fully document all the circumstances leading to the replacement.

Joe...thanks for the link to the article. I feel sorry for the folks that can't get their money out. That's a well written article and really explains it well. I see more negative vs. positive about the future of Shenandoah, based on that article.

I feel sorry for you that has worked all your life and seemingly done a good job representing Shenandoah Life. To be honest I don't feel safe with a $10,000 policy with this company anymore.


From the article.....

"Raman Kumar, a finance professor at Virginia Tech who reviewed company financial records at the request of The Roanoke Times, said some of the stock was already in a downward slide of at least several months at the time of purchase. That was driven by perceptions that Freddie Mac and Fannie Mae would face significant losses because of falling house prices and subprime mortgage defaults. "What made them think that this was a good investment when the market was clearly telling them otherwise?" Kumar asked.".......


Poor investments. They need money.

 

[Joe Moore]

We received a call from Shenandoah this morning about the receiver monitoring the lapses of Shenandoah policies.

They were zeroing in on one agent in our organization with a lot of EFT cancellations and called our attention to the verbiage in the "Notice to Agents":

"AT THIS TIME SHENANDOAH IS NOT WRITING NEW BUSINESS, BUT IT IS
CONTINUING TO RENEW EXISTING BUSINESS. FURTHER, SHENANDOAH IS
CONTINUING TO PAY COMMISSIONS TO BROKERS AND AGENTS IN GOOD
STANDING. AGENTS WHO ACT CONTRARY TO THE INTERESTS OF SHENANDOAH​

MAY FORFEIT THEIR RIGHT TO RECEIVE COMMISSIONS AND MAY ALSO BE

REQUIRED TO REPAY COMMISSIONS RECEIVED WHILE THEY WERE ACTING
CONTRARY TO SHENANDOAH'S INTERESTS. IN ADDITION, ANY PERSON
INTERFERING WITH THE RECEIVERSHIP MAY FACE CLAIMS BY THE DEPUTY
RECEIVER FOR ANY RESULTING DAMAGES SUSTAINED BY SHENANDOAH."

In this same notice, it is saying, "All premium payments for insurance policies of Shenandoah should also continue to be paid to Shenandoah in the normal course of business to continue insurance coverage". This is basically reading, is that insurance coverage is continuing, if premiums are paid.

I have talked with the agent, and feel he will probably alter the way he has been handling inquiries.

We have been told some group agents have already been terminated "For Cause" for rolling business. We have also been told the receiver has "more power than the federal government", and can not only go after future commissions from Shenandoah, but the commissions where the business was rolled to.

I would not be surprised if they did not have the power to go after someone's insurance license, and could at least put an agent in the situation of possibly no company would contract him/her. Competing agents and marketing companies targeting Shenandoah could also possibly be at risk of action by the receiver.

We have had around 80 calls since Friday, and about 15 people walking in the office. We have calmed all but one, who insisted on being taken off a Shenandoah Medicare Supplement.

This is being posted to try to let agents know what is happening, and to let them know the possible problems they could be facing if the replacements became excessive. Shenandoah's assets, including the leaving policyholders, are being monitored daily.

This is the verbiage of an email I just received from one of my friends, who is an official of Shenandoah:

"As far as claims are concerned, we are paying all life claims and if a policy exceeds out retention limit, it is still covered by our reinsurance agreements. In the event that a company is liquidated, and Shenandoah Life is not in liquidation, then the guaranty association of each state comes in to play".

I thought I would post this to try to let everyone know how serious the receiver is viewing this replacement situation. ​

 

[jacobtn]

thanks for that post, Joe. That's very interesting that the agent had so many EFTs stopped that it threw flags.

If the company suffers further harm by agents rolling business, who does it ultimately harm? The agents themselves, who probably will get ZERO if they go into liquidation. Plus lose any chance of selling them in the future if they do go into liquidation, which I would consider a loss because they have some great products.

 

[djs]

We have also been told the receiver has "more power than the federal government", and can not only go after future commissions from Shenandoah, but the commissions where the business was rolled to.

Really? No, I don't doubt they said this, but can they really do this? Remember, you have a fudiciary responsibility to do what is right for the client, as well as the carrier.

If the carrier is in receivership, it may be in some clients best interest to move now while they can. It is rarely in the carriers best interest, unless they come to your office with their oxygen tank in hand and their pacemaker batteries on empty.

I can see their point if you are recommending wholesale change, but if someone calls with a concern??? They would go after commissions from a different carrier? Wow!

Dan

 

[Joe Moore]

I can see their point if you are recommending wholesale change, but if someone calls with a concern???
Dan

I don't think there is any doubt, this was wholesale change.

They way we are trying to explain at our office is that Shenandoah is still in business, but being operated now by the State of Virginia Department of Insurance. As long as they pay their premiums, they will be covered. It may not be under the name of Shenandoah in the future, but their policy under $300,000 in Tennessee, will be GUARANTEED by someone; either Shenandoah, another company or the Life and Health Guaranty Association.

I talked to one lady today that was 83, and had her policy 11 years, $15,000 of coverage. Put the pencil to what she was paying--$103/month, and what she would have to pay now for the same $15,000, and having to deal with 11 years of health issues. There is no way that policy should be replaced.

If someone calls with a concern, we are trying to address the fact that we can put them in something else if they insist, but the attitude of me and my family (with around $1.5 million of life coverage with Shenandoah, and around $80,000 in annuities) are staying put for the present time, and paying our premiums. We are trying to convey that their policy is safe, even there is a bumpy road we are riding on right now.
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Remember, you have a fudiciary responsibility to do what is right for the client, as well as the carrier.

Dan

I am in full agreement this is a fudiciary responsibility to the client. But, when you have verbiage saying what it says about continuing your premiums, to continue your coverage, I believe it means what it says...pay them and your coverage will continue.
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They would go after commissions from a different carrier? Wow!

Dan

This is what we were told. I have no idea where this one would go.... I really do not want to find out. If they came after agents, I would bet forfeiting the commissions would be very cheap compared to what the attorney fees would be for an agent to defend himself/herself.

And if they came after an agents license? Who knows what may happen. It could get very ugly.