Inquiring Agents want to know ... FE Carriers and Financial Strength

[DayTimer]

In one of the Colorado Bankers threads, @scagnt83 said the following:

B++ is the bottom 40% of all US carriers. Not a strong rating at all. Not covered by an agents liability insurance its so risky of a rating.

It is a fact that many of the carriers that offer Final Expense, aka Simplified Issue Whole Life contracts are not rated by any of the financial ratings agencies. When I first landed here about 5 years ago or so, using "A" rated carriers seemed to be advoctaed by several forum participants. But now, the issue of financial stability and creditworthiness seems never to come up when speaking final expense.

So, let's talk about ratings ... should we continue to write for companies that have not been vetted by a 3rd party such as AM Best, S&P, etc?

Do you know if your E&O will cover you for a claim with a carrie not rated A or higher?

How do you feel about financial strength ratings? Do they affect your carrier selection or not at all?

 

[Tahoe Ray]

Do you know if your E&O will cover you for a claim with a carrier not rated A or higher?

Regarding this point only. From my E&O policy under the "we will not be liable to pay a loss in connection with a claim" heading:

I.
Insolvency
based upon, directly or indirectly arising out of, or in any way involving the insolvency, receivership,
conservatorship, liquidation, bankruptcy or inability to pay of a natural person, entity, benefit plan,
insurance company, managed health care organization, reinsurer, risk retention group or captive (or
any self insurance plan or trust by whatsoever name), or limited partnership in which the Insured has
placed business or obtained insurance coverage, or placed or recommended placement of the funds
of a Client; however, notwithstanding the foregoing, the Insurer shall have the right and duty to
defend the Insured in any such Claim, provided such Claim arises from the Insured’s placement of
coverage with an admitted Insurer with an A.M. Best rating of “A-” or better rating at the time of
placement;

 

[DayTimer]

however, notwithstanding the foregoing, the Insurer shall have the right and duty to defend the Insured in any such Claim, provided such Claim arises from the Insured’s placement of coverage with an admitted Insurer with an A.M. Best rating of “A-” or better rating at the time of
placement;

Well, that is important. Thank you @Tahoe Ray for sharing.

 

[DayTimer]

Regarding this point only. From my E&O policy under the "we will not be liable to pay a loss in connection with a claim" heading:

My E&O lets me dip down as low as B+.


According to a call I just placed to my E&O carrier, I am exposed should a claim arise out of business placed with an unrated carrier.

That is certainly something to consider when deciding which company(ies)/fraternal(s) to carry in one's bag.

 

[DonP]

On Fe its irrelevant . There’s so little cash value . It’s a death policy and all that matters is the claim is paid and it will .Few co’s from Family benefit to snl or kskj are am best rated.

 

[DayTimer]

On Fe its irrelevant .

So if an E&O claim arises out of an FE carrier insolvency it doesn't matter why?

 

[HoosierLife]

Has there ever been a verified Final Expense E&O claim?

 

[DonP]

Why would a claim arise out of an insolvency on a fe carrier? 99% of clients would never know as they’ll keep paying their premium . The death benefit will be paid irregardless if the state owns the block of business or its sold to another carrier which happens almost all the time . Shenandoah life a fe carrier went belly up and all the death benefits were paid . To my knowledge no legitimate death claim has never not been paid in history . It’s kind of like what the fed did in 2008 as money funds were going under the important $1 . They stepped in and made them whole. The integrity of the financial system was at stake . Thats why banks can never go under . The lose of confidence would cause mass panic . Same thing in insurance . Somebody will step in as the confidence of the system is at stake .

 

[DonP]

Has there ever been a verified Final Expense E&O claim?

Lol. What lawyer would take a $10 k claim getting only 60% on retainer . They’d laugh at the client .

 

[DayTimer]

Has there ever been a verified Final Expense E&O claim?

I get it, but there's a first time for everything.