Actually, you're prohibited from using the GA as a selling point UNLESS a client asks what happens if the company fails. I don't know how much the assessments are, but I think another way to charge "assessments" as a non-fraternal would be to raise current rates to contract maximums, reduce interest rates to contract minimums, and reduce or eliminate dividends.
Woodmen of the World = No State Guaranty Fund?
- Thread starter jacobtn
- Start date
- 15,041
True.
But even when it does come up, I explain to them what usually happens, company gets bought out of receivership, contracts get honored. But you're right, it is a good reason to avoid current assumption ULs from poorly run companies.
To me the FDIC and GAs have a negative effect. It encourages management to engage in risky behavior, knowing that someone will make the account holder/policyholder whole. It definitely appears that FDIC has a much greater effect on management than the GAs.
Again, I just don't want to get a bill in the mail because management dropped the ball.
You actually have to look at those events. This thread made me do a bit more research on the California guarantee fund. They pay out an ENOURMOUS amount of money every year, even though there have only been a couple of events in the last 10 years.
I was thinking the GA's basically never paid anything, just managed a buyout for the most part. I was wrong. They also don't get themselves (or the clients) off the hook very quickly from what I can tell either. This might be caused by things like annuity payments, not sure. Didn't dive that deep.
Dan
I was thinking the GA's basically never paid anything, just managed a buyout for the most part. I was wrong. They also don't get themselves (or the clients) off the hook very quickly from what I can tell either. This might be caused by things like annuity payments, not sure. Didn't dive that deep.
Dan
I found this thread and I am a little confused. I am in KY and on the Kentucky Life & Health Insurance Guaranty Association website. The FAQ says:
Frequently Asked Questions
Is my company covered by the guaranty association?
The guaranty association provides coverage to owners of covered policies issued by member insurers (life, health, and annuity insurers licensed to write business in the state). To determine if a company is licensed to write business in Kentucky, you may call the Department of Insurance at 502-564-3630. The Department maintains complete and current records of all insurance companies licensed to do business in Kentucky. Information about companies licensed to write insurance in Kentucky may also be obtained from the Department’s Web site.
WOW and MWA are both listed on the site. So just wondering where does it say that fraternals are not covered. It sounds like as long as they are licensed in the state they are covered.
Thanks,
Frequently Asked Questions
Is my company covered by the guaranty association?
The guaranty association provides coverage to owners of covered policies issued by member insurers (life, health, and annuity insurers licensed to write business in the state). To determine if a company is licensed to write business in Kentucky, you may call the Department of Insurance at 502-564-3630. The Department maintains complete and current records of all insurance companies licensed to do business in Kentucky. Information about companies licensed to write insurance in Kentucky may also be obtained from the Department’s Web site.
WOW and MWA are both listed on the site. So just wondering where does it say that fraternals are not covered. It sounds like as long as they are licensed in the state they are covered.
Thanks,
- 4,686
I didn't look but if they are on the list, it's because they are licensed to conduct business in KY.
As far as being covered by the GA, the key word here is "member"
"The guaranty association provides coverage to owners of covered policies issued by member insurers...."
Not everyone licensed to do business in KY are necessarily covered by the GA.
As far as being covered by the GA, the key word here is "member"
"The guaranty association provides coverage to owners of covered policies issued by member insurers...."
Not everyone licensed to do business in KY are necessarily covered by the GA.
You didn't read the Home page or the about us page.
"All insurance companies classified as life insurance companies and licensed to sell life insurance, accident and health insurance and annuity contracts in Kentucky are required by law to be members of KLHIGA (Member Insurers) and as such are subject to assessments of funds as the need arises to carry out the purposes of its governing law ("Act'). Other organizations providing death benefits and health protection such as health maintenance organization, fraternal benefit societies, mandatory government pools or entities that operate on an assessment basis are excluded as member insurers. Consequently, KLHIGA has no obligations with respect to those type of organizations. "
Fraternals are not covered.
your statement about "not required to have reserves" isn't correct. They are still required to have reserves and are closely monitored by the state governments they operate in. Rather than use the State Guarantee FUnd they can to a Maintenance of Reserve Assessment on its members. This cuts both ways - Fraternals cannot be assessed for reserves maintenance for other companies that fail like commercial companies can through the state guarantee fund.
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