Mutual if Omaha Just Left NYS

[DHK]

MichaelBurton,

Like many other things in financial services, you always need to remember to ask this question:

"Compared to what?"

Why should the state of New York require higher reserves than any (every) other state in the United States? Which, coincidentally, is already 100% legal reserves for every death benefit promise on the books?

Life insurance companies must be able to pay all claims, should the need arise. That's in every state. So, why should New York require a HIGHER reserve than 100%? Because regulators want it that way.

 

[Tahoe Ray]

MichaelBurton,

Like many other things in financial services, you always need to remember to ask this question:

"Compared to what?"

Why should the state of New York require higher reserves than any (every) other state in the United States? Which, coincidentally, is already 100% legal reserves for every death benefit promise on the books?

Life insurance companies must be able to pay all claims, should the need arise. That's in every state. So, why should New York require a HIGHER reserve than 100%? Because regulators want it that way.

They also have the highest guarantee association coverage in the country so that may be part of it...

 

[MichaelBurton]

MichaelBurton,

Like many other things in financial services, you always need to remember to ask this question:

"Compared to what?"

Why should the state of New York require higher reserves than any (every) other state in the United States? Which, coincidentally, is already 100% legal reserves for every death benefit promise on the books?

Life insurance companies must be able to pay all claims, should the need arise. That's in every state. So, why should New York require a HIGHER reserve than 100%? Because regulators want it that way.

I think you're asking the right question!

I think it's because the NY regulators don't trust the numbers they are being given.

 

[scagnt83]

I think you're asking the right question!

I think it's because the NY regulators don't trust the numbers they are being given.

I think you completely missed DHKs point.

 

[L5tc]

Yes they are overpriced. Same exact product is a good 20% higher in NY.

To call NYs insurance laws draconian would be an understatement. It seems you have guzzled the cool-aid... it sure does taste a lot better than the truth.

NYs regulations hurt consumers, they do not help. Insurers in other states have plenty of reserves, to imply that policies held by NY residents are more secure than those in others states is pure fallacy.

NY's Term Insurance prices are NOT 20% higher. I can't compare-quote anything else, and I'm too lazy, but term is right where the other states are.

I kind of rely on information from you guys, i took that 20% higher comment as gospel and it was wrong.

 

[MichaelBurton]

I think you completely missed DHKs point.

Nope. I got it exactly. He asked the questions rhetorically. I took them at face value because the assumptions behind his rhetoric (and Bob's) don't add up. In other words, his assumed answer does not satisfy.

As L5tc just pointed out, NY term prices are not 20% higher. So consumers are not being hurt.

And as I pointed out (through my own rhetorical question), if adding to post-policy-lapse profits was indeed the true net effect of the requirement for increased reserves (as Bob suggested), then surely the industry wouldn't fight the legislation tooth and nail in NYS, or across the nation, as it has. The only difference is that in NYS, the regulators actually had a (mild) triumph.

So, we still have this question: why are regulators in NYS requiring increased reserves?

Bob and others would suggest it's just for political gain.

I suppose I don't rule that out entirely. Nobody's motives are ever pure. But I also think it's for another reason: that they are needed.

Let's not forget that the ad-hominem assault on regulator's motives for raising or reducing reserves cuts both ways.

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NY's Term Insurance prices are NOT 20% higher. I can't compare-quote anything else, and I'm too lazy, but term is right where the other states are.

I kind of rely on information from you guys, i took that 20% higher comment as gospel and it was wrong.

L5tc, the accommodation for increased reserves in NYS has largely be born by producers in the form of reduced commissions.

An example: there is no gradation of premiums in NYS for term. In other words, where typical comp for 10 year term starts at 70-80% and goes up, with longer term duration, to as high as 100% or more . . . it stays flat at 70% or so for all term products in NYS. And the commissions often start out lower.

You can get a feel for what I'm talking about on my life insurance commission disclosure page, here. Note that all of the NYS carrier subsidiaries I've depicted show flat and relatively low comp.

 

[scagnt83]

NY Term is 20% higher. Go run an illustration with LFG.

$1mm 20 year term. Age 45. Standard ns

NY- $2,660 per year

SC- $2,144 per year


Same product, same carrier, same client, only difference is the state.


Its not just pricing either. Product options are extremely limited when it comes to Annuities too.


And if you dont think that politics are involved in DOI regs then you are crazy. I rarely agree with Bob about life insurance issues, but there is truth to that statement. Look at what has been going on in CA over the past 5 years. NY is no different.

Instead of asking why NY has higher reserve requirements and restricts products.... ask which carriers/products are at risk in other states that require 100% reserves... show me a state that has major carriers at risk of not being able to pay claims.

NY regs would make sense if there was a significant amount of insolvencies in other states... but that is not the case.

Show me the evidence that warrants higher reserves than what the NAIC already recommends and I will consider changing my stance on NY regs.... but you will not find that evidence because it does not exist.

 

[DHK]

I think you completely missed DHKs point.

He's a CFP... so he's got a handicap when it comes to the subject of insurance.

 

[L5tc]

NY Term is 20% higher. Go run an illustration with LFG.

$1mm 20 year term. Age 45. Standard ns

NY- $2,660 per year

SC- $2,144 per year


Same product, same carrier, same client, only difference is the state.


Its not just pricing either. Product options are extremely limited when it comes to Annuities too.


And if you dont think that politics are involved in DOI regs then you are crazy. I rarely agree with Bob about life insurance issues, but there is truth to that statement. Look at what has been going on in CA over the past 5 years. NY is no different.

Instead of asking why NY has higher reserve requirements and restricts products.... ask which carriers/products are at risk in other states that require 100% reserves... show me a state that has major carriers at risk of not being able to pay claims.

NY regs would make sense if there was a significant amount of insolvencies in other states... but that is not the case.

Show me the evidence that warrants higher reserves than what the NAIC already recommends and I will consider changing my stance on NY regs.... but you will not find that evidence because it does not exist.

I ran term prices across companies and NY was not higher. I took the template male on Term4sale and ran is in NY, Florida, Vermont, exactly the same. Looking internally with one carrier doesn't tell the story.

 

[Tahoe Ray]

I ran term prices across companies and NY was not higher. I took the template male on Term4sale and ran is in NY, Florida, Vermont, exactly the same. Looking internally with one carrier doesn't tell the story.

Banner/William Penn, AG/US life, ANICO...pretty much anyone with a competitve term product is going to be priced very close both in NY and outside.