Claims And Issues

WHY DO REPUBLICANS WANT YOUR SOCIAL SECURITY?

As part of the economic recovery from the effects of the pandemic, Republicans propose that people should take out loans against future Social Security payments.  The intent is to propose a loan instead of direct payments from the federal treasury to replace all or part of the wages that workers have lost during the pandemic shutdown.  This comes from concern that has developed after large corporations and their wealthy executives have already gotten their bailouts.  See, e.g., Michael Hiltzik, Column:  Republicans Seek to Exploit COVID-19 Crisis to Cut Social Security Benefits, LOS ANGELES TIMES online Monday, May 11, 2020;  Helaine Olen, Retirement in America is Already Uncertain.  Republicans Want to Make it Worse, WASHINGTON POST online Wed., May 13, 2020.

    Apparently this thought was inspired by the familiar use of taking out a loan against your life insurance policy.

    But here's a huge difference between the two kinds of insurance:  You never collect your own life insurance.  Somebody else always does.  Life insurance only pays when you die.  The proponents of this plan are right that Social Security Old Age Insurance is insurance, but they are wrong to compare it to life insurance.  Social Security Old Age Insurance is wage insurance or old age insurance.  It pays only when you reach retirement age, to replace part of the income the ordinary person loses when they reach old age.

    In essence, the Republican proposal is to make future Social Security collateral for a loan now.

    Corporations and wealthy people usually have life insurance policies available.  Corporations famously take out life insurance on their executives, pay the premiums, and name themselves as the sole beneficiaries.  Yet they are not asked to put up their own insurance as collateral to get money from any federal stimulus plan so far.  There is no reason to ask normal people to put up their retirement as collateral for the income they are losing now.

    Treating these people differently would not solve problems.  It would make them.

    Most important, it would not be American.  See generally Dennis J. Wall, § 9:38, Try Taking it Away:  Social Security as a Right, in Volume 2 of LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d edition Thomson Reuters West, 2020 Supplements in process), accessible at https://www.dennisjwall.com/works.

Please read the disclaimer.   ©2020 Dennis J. Wall.  All rights reserved.

 

 

POSTSCRIPT TO PRUDENTIAL INVESTIGATED WELLS FARGO'S "ROI" POLICIES. GUESS WHAT THEY FOUND?

In a somewhat belated reaction, Prudential suspended the sale of its life insurance policies through Wells Fargo as it reviews a lawsuit filed by three whistle-blowers in New Jersey in the first week of December, 2016.

In the lawsuit, the plaintiffs alleged that Prudential terminated their employment because they complained that Wells Fargo was selling Prudential's policies to Wells' customers and without the supposed policyholders' knowledge or agreement in many cases.  In that way, the former employees alleged, Wells Fargo employees could meet their super-sized sales quotas at Wells Fargo; not only the new accounts and other financial products, but the "MyTerm" life insurance policies issued by Wells in Prudential's name, all counted toward meeting those crushing quotas.

The former employees were all employed by Prudential as supervisors in the Corporate Investigative Division of Prudential's Legal Department.  The lead plaintiff, Julie Han Broderick, Esquire, was Prudential's Vice-President, Corporate Counsel and one of the heads of Prudential's Corporate Investigations Division.  See the former supervisors' New Jersey complaint, below, and Stacy Cowley, "Prudential Suspends Sales of Its Life Policies by Wells Fargo" (New York Times Online, posted Monday, December 12, 2016).

This is a change from Prudential's initial reaction.  At least to the press, Prudential at first denied that it fired the supervising investigators in retaliation for uncovering the evidence of fraud.  Instead, Prudential at first insisted that the three plaintiffs, whose lawsuit Prudential says it is now reviewing, were terminated from its employment because they were alleged to have committed as-yet unspecified "ethics violations."

Prudential's new response to the lawsuit came the same day that the California Insurance Commissioner announced an investigation into Prudential's practices in "the sale of Prudential insurance policies by Wells Fargo & Co."  See James Rufus Koren, "California to Investigate Prudential Insurance Policies Sold Through Wells Fargo" (Los Angeles Times Online, posted on Monday, December 12, 2016).

Here is a link, below, to the complaint which is being reviewed by Prudential and others at this time.  You can review it for yourself through the following link.  The complaint was filed in Superior Court in New Jersey on Tuesday, December 6, 2016.  It became the first of what is likely to be many pleadings filed in the case of Broderick v. Prudential Insurance Co. of America (Superior Court of New Jersey Law Division -- Essex County, Case Number to be assigned), courtesy of the New York Times website:  https://assets.documentcloud.org/documents/3234987/Prudential-Wrongful-Termination-Lawsuit.pdf.

Moreover, there may be more to come.  "Prudential is not the only outside firm that sells products through Wells Fargo.  The bank offers a variety of insurance products and annuities from other firms.  It's not clear whether those companies are reviewing how Wells Fargo sold their products."  James Rufus Koren, L.A. Times, supra. 

 

This has been a Postscript to an article published yesterday.  Here is the genuine original article, courtesy of Insurance Claims and Bad Faith Law Blog:

PRUDENTIAL INVESTIGATED WELLS FARGO'S "ROI" POLICIES.  GUESS WHAT THEY FOUND?

Prudential made a deal with Wells Fargo.  Wells could issue "a low-cost life insurance policy to the bank's retail customers."  Wells Fargo issued the policies on Prudential paper.  These policies, called "MyTerm" policies, were basically "ROI" policies, or insurance for the Return on Investment.

When the story broke of 5,000 employees at Wells Fargo somehow setting up fake accounts for Wells' customers in order to get sales credits for the sales quotas set at Wells, Prudential decided to investigate these "ROI" policies issued by Wells in Prudential's name.

Guess what they found?

"'This definitely was the same kind of [alleged] conduct that Wells was committing, but through Prudential,'" said one of three whistle-blowers, "an attorney and former co-head of Prudential's corporate investigations division[.]"  Turns out that Wells Fargo employees could get sales credits good toward their sales quotas at Wells by issuing fake 'Prudential' MyTerm life insurance policies in the names of Wells' customers to cover the Return on Investment of the nonexistent accounts.  See Stacy Cowley and Matthew Goldstein, "Accusations of Fraud at Wells Fargo Spread to Sham Insurance Policies" (New York Times Online, posted on December 9, 2016), at http://www.nytimes.com/2016/12/09/business/dealbook/wells-fargo-accusations-sham-insurance-policies.html.

Lessons learned.  Some would say, though, that they already knew what there is to learn from this particular lesson.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall.  All Rights Reserved.

LIFE INSURANCE EXPOSED.

Wondering why life insurance premiums are on the rise?  Answers are explored in terms easy for me and for your clients to understand, by Julie Creswell and Mary Williams Walsh in "Why Some Life Insurance Premiums Are Skyrocketing" (New York Times Online, published in Sunday "Business Day" Section, August 14, 2016; posted on Saturday, August 13, 2016), or accessible in your browser by pasting http://www.nytimes.com/2016/08/14/business/why-some-life-insurance-premiums-are-skyrocketing.html?ribbon-ad-idx=4&rref=business&module=ArrowsNav&contentCollection=Your%20Money&action=click&region=FixedLeft&pgtype=article.

 Many "what," "when," "who," "how" -- and also why" -- type of questions were addressed several months ago in an article that is still timely, again in an easy-to-understand way, by Tara Siegel Bernard, "Life Insurance Buyer's Guide:  What Type, How Much and Who Will Benefit" (New York Times Online, posted February 19, 2016), and once again as an alternative to clicking on a hyperlink you can post the web address in your internet browser:  http://www.nytimes.com/2016/02/20/your-money/life-insurance-buyers-guide-what-type-how-much-and-who-will-benefit.html?ref=business.

 Please Read The Disclaimer.  Copyright by Dennis J. Wall.  All Rights Reserved.

 

 

 

 

 

Related articles

Life Insurers' Captive Reinsurance Subsidiaries Capture Investments.

LIFE INSURERS’ CAPTIVE REINSURANCE SUBSIDIARIES CAPTURE INVESTMENTS.

    The aim of life insurance companies in the 21st Century is to provide investments.  And perhaps they will have enough in reserve to pay beneficiaries upon the death of their policyholders.

    Perhaps not.

    Life insurance companies have transmogrified their industry.   They no longer focus on issuing an insurance policy backed by reserves.  They focus on decreasing their reserves so that they can make investments and attract shareholders by paying dividends.  And paying the officers at the company.

    Statutory accounting has until recently required high levels of reserves except when State Insurance Commissioners grant waivers, also known as deviations.  Captive reinsurance companies are a prime source of deviations from statutory accounting.

    The complicated schemes are explored by Mary Williams Walsh in an informative article on “Risky Moves in the Game of Life Insurance / Complex and Mostly Hidden Maneuvers May End Up Costing Taxpayers and Policyholders” p. 1, col. 1 (New York Times Nat’l ed., “SundayBusiness” Section, Sunday, April 12, 2015), noting among other things, that “more and more money has flowed away from policyholder reserves and into the hands of investors.”

Please Read The Disclaimer.  ©2015 by Dennis J. Wall.  All Rights Reserved.

Related articles

Risky Moves in the Game of Life Insurance

Business Owners' Life Insurance Beneficiaries: What is the Evidence?

   One David Shomers claimed to be the proper beneficiary on a Life Insurance Policy taken out on the life of the co-founder of his business, one Anthony R. Andreoni.  Mr. Andreoni died.  One Miriam Andreoni, who apparently also claimed to be a beneficiary, assigned her interest to the Federal Trade Commission.  The Life Insurance Company filed suit, Mr. Shomers was named a Defendant, and the FTC was granted leave to intervene.  This complicated set of facts comes from Reassure America Life Insurance Co. v. Warner, Download Reassure America Life Insurance Co. v. Warner (S.D. Fla. Case No. 08.22664, Order on Motions For Summary Judgment Filed Nov. 17, 2010) PUBLIC ACCESS also published as 2010 WL 4782776 (S.D. Fla. November 17, 2010)(authorized password required to access Westlaw).

   Mr. Shomers died after he filed a Verified Answer and before he was deposed in the case.  There came an issue of whether the following Paragraph 43 of his Verified Answer was admissible under the Federal Rules of Evidence:

Andreoni [the decedent whose life was insured in the policy at issue in this case] duped Shomers into signing the form of the request for change of beneficiary of the Policy (which Andreoni later altered and forwarded to [Valley Forge Life Insurance Company] ) by presenting Shomers an incomplete form, falsely representing that it was required in connection with a pending policy renewal, intimidating him in executing same, and then, when Shomers said he would hold on to the executed form until he obtained clarification from the court appointed Monitor, Andr[e]oni grabbed the form and fled.
Verified Answer ¶ 43. Because of his death, Shomers will not be able to testify to these facts at trial.

Reassure America Life Insurance Co. v. Warner, 2010 WL 4782776 at *2.  The Court in this Case held, for various reasons including lack of corroboration, that this Verified Paragraph was not admissible.

   Thereafter, the Court granted the FTC's Motion for Summary Judgment for the Life Insurance proceeds, and denied the Shomers Estate's Motion for Summary Judgment.  Id. at *9.

The author is Co-Chair of the American Bar Association's Subcommittee on Life, Health, and Disability Insurance of the Insurance Coverage Litigation Committee.

Please Read The Disclaimer.

  

"Retained Asset Accounts": Using Dead Soldiers' Survival Benefits for Profits.

   "Retained-asset accounts" are in the news recently.  See, e.g, Andrew Frye, "Lawmakers Question Value of Insurer Safety Net to Beneficiaries" (Bloomberg.com, Friday, August 13, 2010).  Retained-asset accounts hold and invest benefits payable by Life Insurance Companies to the survivors of dead soldiers.  The survivor may get a partial payment of death benefits.  Whether or not the survivor receives any of the benefits, in every case the survivor gets a "checkbook" from the Life Insurance Company to draw on the account, with a caution from the Life Insurer not to spend it all in one place.  In the meantime, the Life Insurer takes the money and invests it, making itself a profit.

   Retained-asset accounts are not protected by the Federal Deposit Insurance Corporation.  They may not be protected under State Guaranty Funds in the event of Insurer insolvency.

   If an informed survivor was aware of her or his choice, it seems like the best choice they might make is to take a payout and invest the benefits, by and for themselves.

   The National Conference of Insurance Legislators is set to consider a draft Model Bill of Rights of beneficiaries under retained asset accounts at NCoil's November meeting.  For its part, although the National Association of Insurance Commissioners has apparently issued press releases favoring retained-asset accounts, it will at least examine the issue.  The NAIC's inquiry began at its meeting in Seattle this month.  It is fair to predict that its inquiry will continue at its meeting in October in Orlando.  I plan to be there to report on what they decide.

Please Read The Disclaimer.

Buying Insurance on Other People's Lives: Betting They ... LIVE?

   **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.** 

   Buying Life Insurance on other people's lives is a cottage industry.  There are apparently willing buyers and sellers.  The highs and lows of paying for Life Insurance on other people's lives, and of receiving payments from strangers who watch and wait after you and your clients sell these other people your Life Insurance Policy Proceeds, are explored by Charles Delafuente, "When Life Insurance is More Valuable as Cash" p. F2, col. 4 (New York Times Nat'l ed., "Retirement Special Section," Thursday, March 4, 2010).

   What do the sellers of their own Life Insurance Policy Proceeds think that the buyers are looking forward to in these deals?

Please Read The Disclaimer. 

Annuities: Life Insurance Alternative for the "Sandwich Generation"?

   To start off with, the "Sandwich Generation" is a description of the generation caught between caring for their elderly parents, and caring for their young children.  "Sandwiched" in between these responsibilities, the "Sandwich Generation" is searching for alternatives to Life Insurance Policy benefits that mostly pay out when the Policyholder is dead.  They are looking for regular payouts that are made during their lives.

   Recently, Vice President Joe Biden outlined many initiatives being put forward by the Obama Administration to increase the chances of income security during a person's later years of life.  One idea is to promote "automatic individual retirement accounts" in which Employers would invest a certain amount for Employees who could choose to opt out.  Mr. Biden's remarks were seconded by President Obama's remarks to the same meeting of the White House's Middle Class Task Force.  Mr. Biden is the Task Force Chair.  Remarks of the Vice President and of the President to the Middle Class Task Force Meeting on January 25, 2010.  The proposal for automatic individual retirement accounts with an opt-out provision is also described in the White House's "Fact Sheet:  Supporting Middle Class Families" (Undated, Released approximately January 25, 2010),  at 3.  Parenthetically, the undated "Fact Sheet" also describes the proposed "automatic" enrollment in individual retirement accounts as "voluntary".  Id. at 1, 3.

   The "Fact Sheet" also contains an announcement that the Obama Administration, in a search for lifetime income options or supplements to Life Insurance Policy and other Insurance benefits alone, is:

Promoting the availability of annuities and other forms of guaranteed lifetime income, which transform savings into guaranteed future income, reducing the risks that retirees will outlive their savings or that their retirees' living standards will be eroded by investment losses or inflation.

Id. at 3.

   The Obama Administration's apparent endorsement of Annuities has blown cobwebs off a long-standing retirement vehicle.  As a result, Insurance Companies that sell Annuities have understandably become excited about the prospects of selling more Annuities than they otherwise might have.  Ron Lieber, "Your Money/Annuities Get Obama Fist Bump" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, January 30, 2010).

   By all means, proceed to explore Annuities for the Sandwich Generation and other people as well.  You and your clients would do well to proceed with caution, however.  The market for Annuities is filled not only with Annuities but with widespread confusion and potential risk.  Understanding the risk is key to controlling it.

   The linked newspaper article links to a list of many Guaranty Funds and agencies of State Governments which will, in varying amounts and degrees, pay some amounts toward Annuity payments in the event that the Insurance Company issuing the Annuity becomes insolvent.  The linked list is in turn provided by "ImmediateAnnuities.com," an "online immediate annuities broker".  The list also provides a list of telephone numbers of the various States' guaranty funds.  You and your clients can telephone the guaranty agencies directly to confirm what the guaranty fund, if any, in your State of choice will insure in the event of insolvency and for how much, if at all.

   Further, you and your clients would also do well to travel to web sites and other resources that provide information about Annuities, such as www.BuyaPension.com, which is referenced in the linked newspaper article also.

  Reportedly, financial planners and stock brokers may not be such a good source of accurate information about Annuities:  They do not receive a commission if you and your clients put your money into Annuities.

 Please Read The Disclaimer.

Computer Models Calculate Risks of Buying Your Life Insurance Policy.

   Not content with the limitations of securitization and bundling so amply revealed in late 2008 and early 2009, many investors are turning to Computer Models to calculate the risks of buying Life Insurance Policies -- from you and your clients.  The prospects held out by this approach include bigger returns on investments for Wall Street and maybe most investors, but not for you.

   Wall Street investors are reportedly gathering steam as they grow excited about the returns they could receive on investments in other peoples' Life Insurance Policy payouts.  Investors' risks in "life settlements" and "viatical settlements" include the Insured outliving her or his life expectancy.  "The sooner the seller [Insured] dies, the more money the investment makes."  Michelle Singletary, "Playing Investment Games With Life and Death" (Washington Post Online, Thursday, September 10, 2009).

   This particular "investor's risk" carries with it the specter of potential fraud and potential peril to the Insured seller.  If investors receive a sufficiently greater return on their investment if you or your client die sooner rather than later, i.e., if the purchaser of your Life Insurance Policy payout gets more money the sooner you die, there is obviously a range of incentives built in to that investment, ranging from an incentive to perpetrate mayhem to  at least acquiesce in all sorts of life-threatening policies, practices, and procedures.  Talk about "Moral Hazard"!  This type of 'investment' gives a whole new meaning to that phrase.

Please Read The Disclaimer.

Accountable Accounting by Life and Health Insurance Companies 101.

    We always knew that changing accounting rules was poor Regulation.  Now we know that it is also poor accounting.

    In this Commentary by Jonathan Weil, "Insurers' Biggest Writedowns May be Yet to Come" (Bloomberg.com Thursday, August 20, 2009), commentary is extended regarding Profit and Loss Statements by Health and Life Insurance Companies, and news is reported that may affect our lives.

    Mr. Weil comments regarding something I learned about myself for the first time, called "deferred acquisition costs, or DAC".  Id.  These debits are accounted as credits.  But apparently only by Insurance Companies.  Such as the Health and Life Insurance Companies identified by Mr. Weil in his Commentary.  In basic terms, these particular costs include various commissions and other expenses connected with obtaining new and renewal Insurance Premiums.  The Insurance Companies are allowed to put these debits on their books as a credit, i.e., as an asset rather than as the cost they are.  Id. 

     The news reported by Mr. Weil is old but new.  In a little-reported decision in May of this year, the United States Financial Accounting Standards Board announced that it "is scheduled to release a proposal during the fourth quarter to overhaul its rules for insurance contracts."  Part of the proposed overhaul of rules for Insurance Policies is to eliminate the DAC rule, which is apparently unique to Insurance Companies in any case.  Id.  "What's at stake isn't the real value of the industry's assets, but investors' perceptions of how much they're worth."  Id.

Please Read The Disclaimer. 

More Bad News Reported From Life Insurance Companies, AIG, Bailouts.

    A recent article by a knowledgeable and respected business reporter, Mary Williams Walsh, highlights the poor results displayed by Life Insurance Companies and by AIG both:  "A.I.G. Posts its First Quarterly Profit Since 2007" p. B2, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, August 7, 2009).

    Premiums from AIG's domestic Life Insurance Companies reportedly declined 15% from the same period one year ago.  Id.  A former AIG Life Insurance actuary reportedly surveyed the financial results of all of these Life Insurance Companies as though a State Insurance Regulator were examining them.  The former actuary concluded that 7 of AIG's 8 Life Insurance Companies "could have been deemed insolvent and shut down last year had it not been for the federal rescue." Id.

    "Over all," AIG's reported net income for 2Q 2009 was $1.8 Billion or $1,800,000,000.00.   Federal Taxpayer Funds account for $1.5 Billion or $1,500,000,000.00.  The resulting profit of some $311 Million or $311,000,000.00, is AIG's first reported quarterly profit since 2007.  Id.

  Parenthetically, it is reported in the same article that "[p]remiums for insurance sold [by AIG] to businesses declined by 19 percent from a year earlier," id., although it is unclear what is meant by "insurance sold to businesses" exactly.  The idea is never explained, and it is not mentioned in the published article a second time. 

Please Read The Disclaimer.

 

UPDATE ON Downfall OF HARTFORD, LINCOLN NATIONAL ...

    ... FIRST TWO TO TAP TARP FOR LIFE.  This is an update on the post in these Categories on June 19, 2009.

    The first -- and so far, the only -- Life Insurance Companies to take TARP money from the Federal Taxpayers have reported their current Quarterly results.  HARTFORD FINANCIAL SERVICES GROUP, which reportedly took $3.4 Billion or $3,400,000,000.00 in TARP bailout funds, reported a loss for the fourth consecutive Quarter.  Hartford itself reported a loss for its most recent Quarter of $15 Million or $15,000,000.00.  That compares with a profit in the same Quarter a year ago in the reported amount of $543 Million or $543,000,000.00.

    LINCOLN NATIONAL reported a loss for the third consecutive Quarter.  Its reported loss for the Quarter just ended is $161.4 Million or $161,400,000.00.  One year ago, LN reported a profit in the same Quarter of $124.7 Million or $124,700,000.00.  John Kell, "Hartford, Lincoln Post Quarterly Losses Again" (Wall Street Journal/Dow Jones International reports, available online, July 29, 2009)(subscription required by the Wall Street Journal for full access).

    "Troubled Assets," perhaps; definitely no "Relief" until and unless the LIfe Insurance operations of The Hartford and LN get with the "Program," if ever.

Please Read The Disclaimer.

Resources for Counseling Clients About Life Insurance Companies' Likely Lifespans.

    You may share with me the sense that counseling about Life Insurance Coverage also often includes counseling about how to find out which Life Insurance Companies are most likely to be around next year, or next decade.  A suggested list of helpful resources and links is provided by Kathy M. Kristof, "Personal Finance/How to Check Your Life Insurer's Health" (Los Angeles Times Online, Sunday, June 28, 2009).

Please Read The Disclaimer.

"Your Money, FOR Your Life".

    Bettors have a rigged game going.  They call it "Stranger Originated Life Insurance".  Strangers originate Life Insurance Policies on other people in exchange for settling with the Policyholder while the Policyholder is still alive, of course.  "Life settlements" are paid when people with likely longevity are involved and "viatical settlements" are made when longevity is not likely.  Fancy words.  Here is what they mean for lawyers and for people.

    Strangers take out an Insurance Policy on your Life and they pay the Premiums.  Or strangers take over the payment of your Life Insurance Premiums in exchange for the Policy proceeds.  "Strangers" means just that, they do not know you and they have no interest in you.  Until you die.  Then they claim the proceeds of the Life Insurance Policy which they paid you money to take out.  Seems like a good deal for you, on its face:  You get their money to use during your life, or you get out from under paying Life Insurance Premiums, and they get Life Insurance Policy proceeds you cannot use after you are dead.

    From an insurability standpoint, considering first whether there is any "insurable interest" in your Life justifying the payment to ghoulish investors of your Life Insurance proceeds rather than to, say, any other beneficiary you may designate, there is a question as to why the law or your Life Insurance Policy should recognize these people's claim on your Life Insurance proceeds?

    From a safety standpoint, kindly be aware that the trade in other people's Life Insurance is largely unregulated.  Some of that trade is reportedly illegal.  There is a risk to investors, too, that they will be the victim of shoddy practices or worse, of downright fraud.  Kind of like the fact that there are now demonstrated risks in buying food or consumer goods made in China.

     See generally Benjamin Popper, "The Big Money/Betting on Death" (Washington Post.com, Sunday, June 21, 2009).

Please Read The Disclaimer.

Hartford, Lincoln National First Two to Tap TARP for Life.

    Due to its failing Life Insurance operations, as previously posted here, Hartford Financial Services Group just became the first of the 6 Life Insurance Companies that eagerly sought and received approval for Federal Taxpayer Bailout Money, to receive TARP injections.  Andrew Frye, "Hartford to Accept as Much as $3.4 Billion From TARP (Update 5)" (Bloomberg.com, Friday, June 12, 2009).

    And Lincoln National just became the second of the 6 Life Insurance Companies to receive TARP botoxins.  See Cyrus Sanati, "Lincoln National to Take Bailout Money and Issue Stock" p. B2, col. 1 (New York Times Nat'l ed., "Business Day" Section, Tuesday, June 16, 2009).

    Time will tell what cover TARP will provide for The Hartford and the Lincoln National Life Insurance operations, and what effect The Hartford and the Lincoln National Life Insurance operations will have on TARP.

Please Read The Disclaimer.

The Hurricanes Are Coming, The Hurricanes Are Coming!

    Is your Insurance Coverage prepared for Hurricanes?  The Hurricane Season officially begins on Monday, June 1, 2009.  Ready?  Explore the issues addressed in this report from Slate, by Martha C. White, "Hurricane Prudence/Is the Battered Insurance Industry Ready for the Storm Season?" (Sunday, May 31, 2009).

    The two main issues addressed in this report are the reasons why Property and Casualty Insurance Companies are so much sounder financially than Life Insurance Companies, and some of the changes in Florida Insurance since the 2004 and 2005 Hurricane Seasons struck the State.

    Speaking of Florida and incoming Hurricanes, President Barack Obama reports that Federal Government statistics reflect that "a huge percentage of people" has not experienced a Hurricane.  The statistics reflect that nearly half of the population on the Eastern Seaboard have recently moved to cities there, without experiencing a Hurricane.  See Steven Thomma, "Obama:  Hurricane Readiness is Residents' Responsibility" (McClatchy Newspapers Online, Friday, May 29, 2009).   The Federal Government has provided a potentially useful web site for information and/or planning for Hurricanes:  www.ready.gov.

    Florida newspapers are providing their Hurricane guides at about this time.  Check out in particular "What You Should Know About Your Insurance" in the Orlando Sentinel Hurricane Guide (Sunday, May 31, 2009).  And see also this piece in the Orlando Sentinel's Guide, "How to File an Insurance Claim After the Storm," or contact one of the many Florida State Government agencies, and Private Insurance Companies, listed at "Hurricane Central" on the web site of the Florida Insurance Council, www.flains.org.

Please Read The Disclaimer.

Lifeline and Mr. Liddy: Federal Taxpayers Bail Out Allstate Too.

    Six Life Insurance Companies which applied for Federal TARP or Taxpayer Bailout Funds, have reportedly received preliminary approval for the Taxpayer money.  Jeremy Hobson, "Life Insurers Get a Piece of the Bailout," Friday, May 15, 2009, available online in print or broadcast form at Marketplace on National Public Radio.

    Life Insurance Companies have been robustly applying for the Bailout money for months.  "Life insurers have clamored for six months to get into a program that the nation's biggest banks are trying to flee to avoid governmental restrictions."  Andrew Frye and Rebecca Christie, "Prudential Among Insurers Cleared for U.S. Bailout (Update 2)" (Bloomberg.com, Friday, May 15, 2009).  Credit Default Swaps are the major reason for the clamor by Life Insurance Companies for Federal Bailout money.  As was previously posted here several times, Life Insurance Companies literally made poor bets with Credit Default Swaps and their share prices fell accordingly.

    One of the few surprises in today's announcement is that Allstate is among the applicants.   See also Eric Dash and Diana B. Henriques, "Six Insurers Named to Get Taxpayer Aid" p. B1, col. 1 (New York Times Nat'l Ed., "Business Day" Section, Friday, May 15, 2009)(identifying the qualifying Life Insurance Companies but not noting that they are all Life Insurance Companies nor why these Life Insurance Companies applied for the money).  It was not previously reported, or at least not widely reported, that Allstate had even applied.  They apparently did so because of their Life Insurance operations.  See Andrew Frye and Rebecca Christie, supra, reporting that since October, 2008, "Allstate cut its dividend by 50 percent, halted share buybacks and announced plans to cut 1,000 jobs at its money-losing life insurance unit."

    Allstate advertises Life Insurance products at Allstate Financial online.

    Mr. Edward Lilly is famous, at the present time, for receiving "only" $1.00 for heading up AIG during its current time of trial.  AIG is apparently forced to use mostly Taxpayer Bailout money in its budget at the present time.  (Federal Taxpayers own 79.9 percent of the shares of AIG at this point.)  It is very well known that Mr. Liddy previously headed up Allstate until he came out of retirement to head up AIG.

    Allstate reportedly declined to say how much money it stands to receive, but there is no doubt that the amount is much more than "$1.00".  The Hartford reportedly announced that it alone could now receive $3.4 Billion of Federal Taxpayer money.  Eric Dash and Diana B. Henriques, supra.  Another qualifying applicant, Lincoln National, "said it may receive $2.5 billion."  Andrew Frye and Rebecca Christie, supra.

Please Read The Disclaimer.

Can You Write "LIFE" Insurers Seek TARP Funds?

    Property and Casualty Insurance Companies give every evidence of solvency.  They are not the Insurance Companies which are seeking TARP Funds or Bailouts using Federal Taxpayer Funds.

    Instead, the Insurance Companies which are seeking Federal Taxpayer Funds are all Life Insurance Companies.  A couple of the newspaper reporters who have gotten this are David S. Hilzenrath and Brady Dennis, in "Treasury Weighs Investment in Life Insurers" (Washington Post Online, Thursday, April 9, 2009).  Compare, for example, Robert Cryan and Jeffrey Goldfarb, "Breakingviews.com/Little Rationale to Aid Insurers" p.B2, col. 1 (New York Times Nat'l Ed., "Business Day" Section, Thursday, April 23, 2009)(a report which does not report that the "insurers" seeking the "aid" are all life insurers).

    Why are Life Insurance Companies seeking a Bailout while Property and Casualty Insurance Companies are not?  Life Insurance Companies, unlike Property and Casualty insurers, foolishly invested heavy amounts of their shareholders' funds in securitized financial products such as Credit Default Swaps (read:  AIG financial techniques practiced by companies with other names).

    Sadly, the shareholders of these Life Insurance Companies suffered great losses.  Their sadness is no reason for shifting that sadness or that liability to Federal Taxpayers.

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Life Insurance Companies Get Premiums From Swine Flu.

    One person's panic is another person's Premium.  Fears of swine flu have increased the number of people paying Premiums to Life Insurance Companies, it is reported on his blog by Robert Trigaux, St. Petersburg Times Business Columnist, "Venture" Blog, April 30, 2009 post, "Florida Busniesses Prep For, React to Swine Flu," on St. Petersburg Times Online.

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Hartford Changes Accounting, Announces Transformed Financials.

    Before The Hartford and other corporations changed their mark-to-market accounting values, The Hartford in particular was headed for a huge loss.  The large loss would have followed these recent developments:

    1.  The National Association of Insurance Commissioners repealed a requirement that certain Insurance Companies maintain a high level of Reserves sufficient to meet claims.  The repeal of the Reserves requirement was particularly sought by Life Insurance Companies.  The Hartford got about $1,000,000,000.00 or $1 Billion "of regulatory relief from capital and reserve requirements meant to protect policyholders" in this way.  See David S. Hilzenrath, "Accounting Changes Boost Hartford's Books" (Washington Post Online, Friday, May 1, 2009).  

   2.  The Hartford reportedly is looking at corporations within its group which it can sell to raise capital.  Id.

  3.  In addition, The Hartford recently announced that it will not issue new business either in Japan or in the U.K.  Id.

  After many large corporations changed to mark-to-management accounting values instead, they were able to release rosier reports on their financial condition.  See Joe Nocera, "Talking Business/Same Data, Conflicting Forecasts" (New York Times Online, Saturday, May 2, 2009).  This included The Hartford, which reported "a pre-tax gain of $550 million" partly due to the change in accounting values.  Even with these changes, it reported a loss for 1Q 2009 of $1.2 Billion.  David S. Hilzenrath, supra. 

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Sector Snapshot for Insurance is Here Again ....

.... Again, Courtesy of The New York Times.  Today's Sector Snapshot/Insurance appears on page B8, col. 1 of the Business Day Section of the National Edition of The New York Times for Tuesday, April 28, 2009.  (Be prepared to go through a click on "Financials" if necessary to bring out the slide bar and click on "Insurance".)

    The Bottom Five over the Last Year are still Life Insurance Companies all.  The efforts of many Life Insurance Companies to get Federal Taxpayer Bailout Funds, while not yet entirely successful, have apparently altered recent investor perceptions somewhat.  The Top Five Performers in the Insurance Sector of the stock market over the Last Week are all Life Insurance Companies too, and two of them are in the Bottom Five over the Last Year.

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Life Insurance Companies and TARP: Less is Suddenly More.

    It has been well documented that Life Insurance Companies, which mostly made very bad securitization bets in recent years, desperately included Federal Bailout Funds or TARP money in their business models.  See, for example, recent posts here on March 31, 2009 and April 10, 2009.

    Now it is reported, in the wake of gathering restrictions on the use of Federal Bailout Funds from TARP, that one of the larger Life Insurance Companies, MetLife, has announced that it will not take TARP money.  Mary Williams Walsh, "MetLife Says it Won't Seek Aid for Troubled Assets" p. B6, col. 5 (New York Times Nat'l Ed., "Business Day" Section, Tuesday, April 14, 2009).

    MetLife Insurance Company is reportedly already satisfied with "a separate federal program, operated by the Federal Deposit Insurance Corporation, to raise about $397 million".  Id.

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LIFE Insurance Companies Seek TARP Cover For Bad Securitization Bets.

    At least one of the Life Insurance Companies that made poor bets on securitization and has tried to apply for Federal Bailout Money by buying a bank, has been turned down.  Genworth Financial, Inc. also reportedly sells Mortgage Insurance.  Lu Wang, "Boeing, Boston Scientific, Genworth, MEMC: U.S. Equity Preview" (Bloomberg.com, Friday, April 10, 2009).

    It may be that Genworth has failed to qualify for the Troubled Asset Relief Program ("TARP"), or Bailout, because the Office of Thrift Supervision finally acted in response to a deadline that Genworth did not meet in order to buy a bank in the first place.  See, e.g., Andrew Frye, "Genworth Fails to Qualify for TARP; Shares Plunge (Update 2)" (Bloomberg.com, Thursday, April 9, 2009); David S. Hilzenrath, "Richmond Insurer Fails to Qualify for TARP/Genworth Tried to Become a Thrift" (Washington Post Online, Friday, April 10, 2009).

    Not one Property and Casualty Insurance Company has applied for a Bailout.  When these newspaper reports refer only to "insurance companies," sometimes they do not say it.  What they are referring to, of course, is LIFE Insurance Companies, ONLY.

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Life Insurance Companies And Life Support: Federal Taxpayer Funds?

    A recently published newspaper report continues the ongoing story of the demands by Life Insurance Companies for Federal Taxpayer Funds.  These demands were previously posted here, along with the dropping financial status of most Life Insurance Companies due primarily to their choices of investments -- which included now-defunct derivatives, most recently on 02.02.09, 03.03.09, and 03.04.09.  The recently published newspaper report is by Ralph Vartabedian and Tom Hamburger, "AIG Crisis Could be the Tip of an Insurance Iceberg" (Los Angeles Times Online, Monday, March 30, 2009).

    Previous posts explored the developing failures of the investments chosen by Life Insurance Companies, and the effects of those failing investments as they failed, beginning on July 12, 2008, and on 09.16.08, 12.21.08, 01.13.09, and February 4, 2009, in addition.

    Life Insurance Companies have been telling a story for 8 months now that other people, and circumstances beyond their own control, are to blame for the lowering credit ratings and financial profiles of Life Insurance Companies.  Do they really think that anyone is convinced of that? 

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Life Insurance Companies in Their Own Box Called "Lagging".

    The New York Times' eagerly awaited Sector Snapshot for Insurance is here.  (As always, be certain to click in the Sector Snapshot on the "Financials" Category, and then on "Insurance.")

    In an UPDATE of yesterday's post explaining how Life Insurance Companies alone in the Insurance Industry are seeking Federal Taxpayer (Bailout) Money, Life Insurance Companies populate the lower left quadrant of the Insurance Sector in this Snapshot.  That is the quadrant reserved for "One-Year Price Return" behind the S&P 500 over the last year, AND "One-Week Price Return" behind the S&P 500 over the last week.

    The Times' "Tracking Performance" lists Life Insurance Companies in the "Bottom Five" over the last year AND in the "Bottom Five" over the past week.

    The reason for all this lagging by Lifers?  "Life insurers were under pressure as traders awaited word on an industry request to participate in government aid as part of the Troubled Asset Relief Program," the Times reports.  Id., p. B8, col. 1 (New York Times Nat'l Ed., Business Day Section, Wed., March 4, 2009).

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Life Insurance and the Federal Taxpayer?

    Newspaper reports recently confuse all Insurance Companies with Life Insurance Companies.  Only Life Insurance Companies, however, are asking for Federal Taxpayer Money at this time.  See Mary Williams Walsh, "Months In, Insurers Ask Whether Aid Is On Its Way" p. B1, col. 6 (New York Times Nat'l Ed., Business Day Section, Friday, February 27, 2009)(every Insurance Company mentioned in the linked report is a Life Insurance Company).

    As was posted here previously, no Property and Casualty Insurance Companies, for example, have yet requested Federal Taxpayer Funds.

    The major differences between Life and P&C Insurance Companies in this regard, which made Life Insurance Companies -- including AIG -- the only Insurance Companies to seek a Federal bailout?  Life Insurance Companies marketed their Policies as "products" and accepted large amounts of Premiums for guaranteeing still other Securitized Financial products including Credit Default Swaps.  The Life Insurance Companies that guaranteed many CDS's now find themselves much in debt for them.

    (Of course, Credit Default Swaps were not regulated at the Federal level, and they were not regulated at the State level even when they functioned as Insurance without capital reserves to back them.)

    By and large, Property and Casualty Insurance Companies did not and do not market their Policies as "products" and they did not invest nearly as heavily in instruments like CDS's.

    Those are some big differences.

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"They Bet Your Life Insurance Reserves. And You Lost?": UPDATE 2

   MAYBE IN SOME STATES?

    This post updates a couple of previous posts here.  The post of December 21, 2008, "They Bet Your Life Insurance Reserves.  And You Lost?", contains a postscript added on January 12, 2009 reporting that the National Association of Insurance Commissioners scheduled a Hearing for the end of January, 2009 on "emergency" measures proposed by several Life Insurance Companies requesting an expedited process from the NAIC to adopt their proposals.  The issue behind all of the proposed measures was whether to immediately loosen the Reserves requirements imposed by the States on Life Insurance Companies.  The change would have allowed the Life Insurance Companies to operate immediately, and to report their impending results from 2008, with fewer Reserves than were previously required (and are still required, now).

    On February 2, 2009, a second post reported here that the National Association of Insurance Commissioners executive committee scotched this idea.  In an NAIC Hearing held on Thursday, January 29, 2009 the linked proposals were all voted down in a "nearly unanimous vote" of the NAIC executive committee; only one (1) State Insurance Commissioner voted in favor of the Life Insurance Companies' proposals.  The evidence to support this proposal either did not exist or was not presented by the Life Insurers, according to Commissioners.

    Now certain Life Insurance Companies are taking their case, if not evidence, to individual State Insurance Commissioners who they perceive may be more sympathetic to their request.  See Andrew Frye and Erik Holm, "Insurers in Illinois, Iowa [and Kansas] Seek Relief From States (Update 3)" (Bloomberg.com, Friday, January 30, 2009).

    The risks, rewards and consequences to Policyholders, consumers, Life Insurance Companies and their lobbyists are explored in detail in this linked report well worth a look:  David S. Hilzenrath and Nancy Trejos, "The Risks of Life Insurance/Anxiety About Industry Complicates Consumer Choices" (Washington Post.com, Sunday, February 1, 2009).

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"They Bet Your Life Insurance Reserves. And You Lost?": UPDATE.

MAYBE NOT.

    This post updates a previous post here on December 21, 2008, "They Bet Your Life Insurance Reserves.  And You Lost?"  A postscript added to that post on January 12, 2009 reported that the National Association of Insurance Commissioners scheduled a Hearing for the end of January, 2009 on "emergency" measures proposed by several Life Insurance Companies requesting an expedited process from the NAIC to adopt their proposals.  The issue behind all of the proposed measures was whether to immediately loosen the Reserves requirements imposed by the States on Life Insurance Companies.  The change would have allowed the Life Insurance Companies to operate immediately, and to report their impending results from 2008, with fewer Reserves than were previously required (and are still required, now).

    The National Association of Insurance Commissioners executive committee reportedly scotched this idea.  In an NAIC Hearing held on Thursday, January 29, 2009 the linked proposals were all voted down in a "nearly unanimous vote" of the NAIC executive committee; only one (1) State Insurance Commissioner voted in favor of the Life Insurance Companies' proposals.  The majority of State Insurance Commissioners included the New Hampshire Insurance Commissioner, who issued this statement after the NAIC executive committee vote:

Simply put, the [Life Insurance] industry has not made a credible case for why we need to make changes on an emergency basis, and why those changes should be limited to the specific proposals made by the industry.

    One newspaper described the Life Insurance Company's defeated proposals "as a cashless bailout.  They would have changed the way companies and regulators measure life insurers' financial strength, making them look healthier than they otherwise would appear."  David S. Hilzenrath, "Relief Denied For Life Insurers/Industry Must Keep Financial Cushion" (Washington Post.com, Friday, January 30, 2009).

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Sector Snapshot: Insurance -- Lagging Life Insurers.

    News posted here on December 21, 2008 and updated most recently last night, "They Bet Your Life Insurance Reserves.  And You Lost?  Maybe Not," posted in the categories of Life Insurance, Market Performance, and Reserves, is reflected in the news of today.   Life Insurance Companies are leading the laggards or lagging behind much of the rest of the Insurance Sector in share price in this latest New York Times Sector Snapshot:  Insurance (New York Times Nat'l Ed., Business Section, Tuesday, January 13, 2009).  (Go to the "Categories" box on the snapshot and select "Financials".  On the dropdown bar that appears when you click on "Financials," select "Insurance".)

    Yesterday the National Association of Insurance Commissioners denied a very recent request made by many Life Insurance Companies, which have lost large amounts of money betting on Credit Default Swaps and other securitization "products," to immediately reduce the amount of Reserves they must carry.  See Andrew Frye, "Hartford Falls As Plea For Speedier Reform Rebuffed (Update 4)" (Bloomberg.com, Monday, January 12, 2009).   The consistent lag in share price of these Life Insurance Companies in question reflects the stock market's response to their financial decisions over the past year as well as over the past week.

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They Bet Your Life Insurance Reserves. And You Lost?

  Maybe Not. 

    Corporations make profits in many ways.  Most invest.  Many Life Insurance Companies invested in risky securitized financial products, like credit default swaps.  Ironically, they invested Life Insurance Premiums paid to them by their own Policyholders.  These same Life Insurance Companies want to subject those same Policyholders to an increased Risk of not being paid the full value of Claims made on their Life Insurance Policies.  (The bad influence of CDSs on Risk Management Practices has been the subject of more than one past post in this space.)  Now, it is reported that these Life Insurance Companies want to change the rules of the game.  See Andrew Frye, "Regulators May Ease Reserve Rules as insurers' Options Dwindle" (Bloomberg.com, Friday, December 19, 2008).

    Here is a timely example of how Life Insurance Companies invested in financial arrangements "backed" by CDSs, and lost Millions.  It is reported that Hoosier Energy Rural Electric Cooperative in Indiana agreed to a $300 Million loan from -- read, investment by -- John Hancock Life Insurance Company.  The deal reportedly included two credit-default swaps from an Insurance Company that would guarantee payments by Hoosier to John Hancock Life.  The Insurance Company which agreed to enter into the CDSs, i.e., to guaranty Hoosier's payments to John Hancock, was Ambac Assurance Corporation.  The hitch to that guaranty was that Ambac would have to receive a certain rating from Credit Rating corporations at all times, or Hoosier would have to find a new Insurance Company with acceptable ratings to take over the CDSs.  Ambac lost its acceptable ratings in June.  Hoosier nonetheless made its payments.  As Hoosier reportedly was about to make a deal with an acceptable substitute for Ambac  -- reportedly, Berkshire Hathaway -- John Hancock Life Insurance Company notified Hoosier that the loan was in default on the loan agreement and demanded that Hoosier pay a fee of $120 Million to John Hancock, within one (1) week.  See Gretchen Morgenson, "Fair Game/Just Call it Hoosier Baroque" p. 1, col. 2 (New York Times Nat'l Ed., SundayBusiness Section, Sunday, December 21, 2008).

    Life Insurance Companies are required to post Reserves at levels that are sufficient to pay Life Insurance Claims.  However, the performance failures of CDSs and other risky securitized investments has left Life Insurance Companies financially shaky.  The failures have hurt the bottom line of these Life Insurance Companies.  Their proposed rules change would lower the amount of their required Reserves, at least beginning with so-called variable annuities.  This would have the effect of reducing the likelihood that claims on these variable annuities now would be fully paid, and possibly also reducing the likelihood that claims later on Life Insurance Policies will also be in doubt if and when Reserves requirements for those Policies are similarly weakened. 

    In addition, the Life Insurance Companies in question want the loosened model regulations to take effect sooner than later, in early 2009.  The period for comments to this proposed change ends the day after Christmas -- December 26, 2008 -- a breathtakingly short period of time within which people can effectively oppose this proposal.

    People interested in opposing any reduction in Reserves requirements on so-called "variable annuities" for these Life Insurance Companies can leave their comments with the National Insurance Commissioners web site online, although which NAIC model law is at issue, exactly, is not as clear as where to leave comments online.

    Post your comments to the National Association of Insurance Commissioners through www.naic.org.  It is uncertain, but it appears that a likely candidate for the linked newspaper report's description of the NAIC model regulation about to be loosened for Life Insurance Companies' Reserves is the NAIC Standard Valuation Law, here:  .Download NAIC LIFE INS COMMITTEE DRAFT 12.05.08 REVISIONS TO MODEL ACT 820.VALUATION LAW.     

Postscript of Monday, January 12, 2009:

The NAIC must have listened.Reportedly, late on Friday, January 9, 2009 the NAIC "rejected an industry request to approve changes by Jan. 16 and plans to hold a hearing at the end of the month to seek input from consumer groups before taking a vote".  Andrew Frye, "Hartford Falls As Plea For Speedier Reform Rebuffed (Update 4)" (Bloomberg.com, Monday, January 12, 2009). 

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