Insurance Company Financial Stability Poll

[MichaelBurton]

The hard part is, we can't know or control the future. Look at Genworth. They were a good A rated carrier that sold alot of LTC over the last 10yrs. Big change in short time. My guess is 99% of agents that sold their products back then would have said it couldn't happen.

To me, as long as they are an A- rated company or better, and currently in good shape with good products and cust svc, I am fine with it. Genworth probably won't be the last "good" company to have a slide like that unfortunately.

Selling a B rated company, well (to me) that is just asking for potential problems. Doesn't mean there will be, but odds are higher there could be issues than an A rated company.

Most if not all E&O policies will not protect the agent who recommends a policy from a carrier which, at the time of the sale, was rated below A- from A.M. Best.

Unfortunately, that means that any company who falls into B++ or worse status will get effectively pulled from the shelves for most brokers and even, I would expect, many IMOs. And that, I'm afraid, would be like a death blow to a company.

I only recently came to understand this relationship with the E&O coverage and the ratings. If I had known it sooner, I think I would have steered my clients away from even A- carriers. The reason being: they are just too damn close to the edge of the cliff, in my opinion.

 

[pfg1]

Most if not all E&O policies will not protect the agent who recommends a policy from a carrier which, at the time of the sale, was rated below A- from A.M. Best.

Unfortunately, that means that any company who falls into B++ or worse status will get effectively pulled from the shelves for most brokers and even, I would expect, many IMOs. And that, I'm afraid, would be like a death blow to a company.

I only recently came to understand this relationship with the E&O coverage and the ratings. If I had known it sooner, I think I would have steered my clients away from even A- carriers. The reason being: they are just too damn close to the edge of the cliff, in my opinion.

I hear ya. Problem is, the ratings from the various companies vary. So S&P might be A, AM Best A-, Fitch A ...etc. You know the deal. Unless you are with one of the big boys, they usually do vary somewhat.

 

[MichaelBurton]

I hear ya. Problem is, the ratings from the various companies vary. So S&P might be A, AM Best A-, Fitch A ...etc. You know the deal. Unless you are with one of the big boys, they usually do vary somewhat.

I am pretty sure, at least for the E&O policy clauses, that only A.M. Best A- is used as the cut-off. I could be wrong; but in my fifteen years, I've not seen it differently on any E&O policy I've owned.

 

[omahainsurance]

Ya I agree we should all be aware of the financial stability of the underwriting company. However saying you won't write a B rated carrier period is odd(thats a nice ish word). Thats like saying "I won't shop at anywhere besides walmart because the other stores just aren't big enough. I'll never shop at a local mom and pop joint because they could fail." OK maybe not exactly the same thing but I think you get my point. If nobody does business with B rated companies, how the heck do they grow and become A+ rated companies? And didn't we all pass a test that said there was some deal where if an insurance company failed, some other entity would most likely>>>> the customer will be OK... and I didn't actually spell it out for you!

MichaelBurton,

This is really an issue of doing your due diligence BEFORE you meet with the prospect.

Also, I think an A- or better A.M. Best rating is most important when you're dealing with cash value life insurance and annuities. I want my E&O to cover it in the event of a company liquidation. If, at the time you write it, and the company is rated LOWER than an A- (with a stable outlook)... then you could be liable for it and E&O won't cover it. With term, I'm not as worried about it because SOMEBODY will assume the contract, but I still won't go below an A- rating with STABLE outlook.

If there's a 'B' by any ratings agency, I won't write it... period.

 

[DHK]

Your job as an agent is to manage risks - both for your clients and for your personal business.

It's a professional liability to recommend any company that won't be covered under your E&O in the event of liquidation.

Show me a credible E&O company/policy that will cover B-rated insurers, and I'll consider it. Until then, the risks on me AND on the client... just don't cut it for me.

And counting on state guaranty funds... is not a great defense in the event of a complaint.

 

[ccbaxter]

Actually, there are any number of credible e and o providers that do insolvency carve outs. Lower rated insurers may sponsor a policy with either a specific company exclusion, or a lower level carve out. IMO's that offer lower rated companies--the same. Life Secure, the unrated LTC carrier, sponsors a Napa plan with no rating requirement (if I recall correctly.)

The problem with all of them is you have to be contracted or appointed with the insurer or IMO, and to some extent, major or minor, infringe on your independence in my opinion.

The Nailba and Independent Agent e&o through Gallagher have a B+ insolvency carve out so you're not handcuffed to an insurer or IMO. Price is pretty good, too.

 

[MichaelBurton]

Actually, there are any number of credible e and o providers that do insolvency carve outs. Lower rated insurers may sponsor a policy with either a specific company exclusion, or a lower level carve out. IMO's that offer lower rated companies--the same. Life Secure, the unrated LTC carrier, sponsors a Napa plan with no rating requirement (if I recall correctly.)

The problem with all of them is you have to be contracted or appointed with the insurer or IMO, and to some extent, major or minor, infringe on your independence in my opinion.

The Nailba and Independent Agent e&o through Gallagher have a B+ insolvency carve out so you're not handcuffed to an insurer or IMO. Price is pretty good, too.

Thank you for your post. Can you help me understand what you mean by "insolvency carve-out?"

I actually am presently insured by a policy written through Gallagher (backed by Everist) and I thought the cut-off was A-. Maybe I'm mistaken. Maybe it's something a little different than what you described. Anyhow, I've requested a copy of the master certificate. Price was indeed very good.

Incidentally, I offered a poll in the E&O space to see what the cut-off was on most people's policy. I was the only one (as of yesterday) that even replied. Perhaps I posted in the wrong area. But I wonder if most agents don't know what the cut-off is . . . Thoughts?

Again, thanks for your post!

 

[ccbaxter]

An insolvency carve out is a term I picked up from an e and o broker. Basically the base policy doesn't cover any carriers for insolvency but then they "carve out" the insolvency protection. The standardized policies you usually see advertised have an A- carve out, but you can call an e and o broker and they can shop you any insolvency carve out you want or need. Want to write a Best rated C carrier? You can get an e and o policy to cover that, but be prepared to pay.

All things considered, the best value I've found so far is the NAILBA/Independent Agents policy. Covers insolvency down to B+ and covers e and o (but no insolvency coverage) for lower rated carriers. So if I write a B rated company, I carry the insolvency risk but...I think that's negligible for my situation. (I might feel differently if I was in a different market, say retirement planning for high net worth individuals. Or if I did a large volume.)

After doing some shopping around and some soul searching about the coverage I need, I decided the NAILBA/Independent Agents policy will work the best for me and is a good value, too.

 

[MichaelBurton]

An insolvency carve out is a term I picked up from an e and o broker. Basically the base policy doesn't cover any carriers for insolvency but then they "carve out" the insolvency protection. The standardized policies you usually see advertised have an A- carve out, but you can call an e and o broker and they can shop you any insolvency carve out you want or need. Want to write a Best rated C carrier? You can get an e and o policy to cover that, but be prepared to pay.

All things considered, the best value I've found so far is the NAILBA/Independent Agents policy. Covers insolvency down to B+ and covers e and o (but no insolvency coverage) for lower rated carriers. So if I write a B rated company, I carry the insolvency risk but...I think that's negligible for my situation. (I might feel differently if I was in a different market, say retirement planning for high net worth individuals. Or if I did a large volume.)

After doing some shopping around and some soul searching about the coverage I need, I decided the NAILBA/Independent Agents policy will work the best for me and is a good value, too.

I think that is what I have, too. Thank you for the explanation, CC!

 

[scagnt83]

If you use a discount cookie cutter E&O provider then you get a cookie cutter E&O policy. If you use a broker and get a customized E&O policy, then you can get features and benefits that the cookie cutter policies do not have.


As far as stability of life insurers, well, if you are worried about that then you are not paying attention to history.... or the way life insurers are regulated.