Insurance Claims And Issues

Unidentified Claim Practices Settlement by Life Insurer -- Update.

     This Updates a Previous Post.

    The unidentified claim practices settlement by a Life Insurance Company will remain unidentified if it is left up to the parent Life Insurance Company, apparently.  The parent Company in question is Healthmarkets, Inc.  It is also in the business of selling Health Insurance Policies through numerous subsidiaries.  Here is Healthmarkets' own July 21, 2008 "Press Release" on "Healthmarkets' Subsidiaries Reach Settlement With State Regulators".  It could not be more vague if it was deliberately written to be vague -- which clearly seems to be the case with this press release.

    Three days after Healthmarkets' Press Release regarding its settlement with many State regulators, Reuters reported that the ratings of Healthmarkets, Inc. and many of its subsidiaries were downgraded.  Reuters Report, "A.M. Best Downgrades Ratings of HealthMarkets, Inc. And Its Subsidiaries" (Thursday, July 24, 2008).

    It turns out that the settlement is massive by any measure.  HealthMarkets and its affected subsidiaries agreed that they would pay $20 Million in fines and penalties now, and that they would pay another $10 Million in the future if they did not live up to the progress requirements they agreed to.

    It is also an innovative settlement arrangement.  The ground-breaking feature of it is that State Insurance Regulators worked together under the auspices of the National Association of Insurance Commissioners to address many complaints against HealthMarkets, Inc. and its subsidiaries across the entire nation.  When the settlement was signed in July, 29 jurisidictions signed off on the settlement at that time.  Designated 'enforcers' of the settlement are Washington State, Alaska, California, Florida, Oklahoma, and Texas.  The settlement agreeement provides an August 18, 2008 deadline for other State Insurance Regulators to sign on.

    As part of the settlement agreement, HealthMarkets, Inc. and its participating subsidiary companies must report two times a year through December 31, 2009 that they have imporved in some 13 areas covered by their agreement, including:

    Agent training and supervision;

    Claims handling; and

    Complaints and grievances, among others.

For a comprehensive report on the settlement, participating State Insurance Regulators, and how the settlement agreement was reached, see this NAIC Press Release, "State Insurance Regulators Levy $20 Million Fine Against Healthmarkets" (July 24, 2008). 

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Unidentified Claim Practices Settlement by Life Insurer.

     In 2007, these three Life Insurance Companies reportedly took back over $115,000,000.00 or over $115 Million from Floridians who paid them Premiums:

     1.  MEGA LIfe and Health;

     2.  Mid-West National LIfe, and

     3.  Chesapeake Life.

Each is reportedly a subsidiary of HealthMarkets, Inc.  HealthMarkets recently settled many claims in many States for unidentified practices, reportedly resulting in a payment of $1,700,000.00 or $1.7 Million "for Florida".  Kris Hundley, "Florida to Get $1.7-Million From Insurance Settlement" (St. Petersburg Times Online, Friday, July 25, 2008).

If more information can be located from other sources, it will be posted here in the future.

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Increasing Risk, Increasing Insurance Role.

    Current market conditions strongly reflect significant risk.  In this situation, Insurance Coverage Issues and Claims are inevitable.  They are coming.  They are coming under all sorts of Insurance Policies.  These Insurance Coverage Issues and Claims will in turn trigger many accusations that Insurance Companies and others acting in Fiduciary settings did not act in Good Faith and Deal Fairly.  In a climate like this one, these Issues and Claims are inevitable.  See generally Peter G. Gosselin, "In This Economy, Failure is an Option" (Los Angeles Times Online Sunday, July 20, 2008).

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Earthquake Shakes Up Some Insurance Coverage Expectations.

     A newspaper report about Insurance Coverage and Catastrophe Claims following the Sichuan earthquake in China, highlights issues important to people in the United States who face the real possiblity of having to make Catastrophe Claims.

    Concentrating on two types of Insurance, it is reported that holders of Property Insurance Policies are left with little more than uncovered Catastrophic Damage, while the much smaller group of Chinese Life Insurance Policyholders have fared much better.  Life Insurance Policies in China, as elsewhere including in the United States, generally pay benefits upon an accidental death regardless of cause.  Earthquakes as a cause of loss are almost always Excluded in Property Insurance Policies in China, however.

     "[A]s in California," in order to obtain Coverage for losses caused by Earthquakes, for example, "you have to buy a special policy and pay extra."  "In China, Few Are Covered by Earthquake Insurance," by Don Lee (Los Angeles Times Online, Tuesday, June 24, 2008). 

     These differences are illustrated in the newspaper report by convincing numbers.  First, so far about a quarter of a million Property Insurance Claims have been presented to China Property Insurers as a result of this Catastrophe.  Most of those CatClaims are reportedly on account of damage to personal property.   In addition, some Three Million houses were destroyed.  Approximately $15 Billion to $20 Billion of Property Damage is estimated as a result of the Sichuan earthquake.  Property Insurance Companies have paid out $20 Million in CatClaims.

     With regard to Claims on Life Insurance Policies, on the other hand, an unreported number of Claims has been presented since the Sichuan earthquake.  It is reported that "only a tiny fraction of people hold such policies."  Reportedly, Life Insurance Companies paid out $26 Million in Claims resulting from the earthquake.

     Finally, it is of more than passing interest to Homeowners seeking Property Insurance Coverage outside of China, that the Earthquake Exclusion was reportedly adopted after a 1996 meeting of "earthquake scholars" and "experts".  In that meeting, participants predicted that earthquakes would trouble China for the next ten to twenty years.  The Property Exclusion was almost immediately written in response, it is reported.

     In the United States, one of the central and largely unreported battlegrounds concerning Property Insurance Coverage, particularly for CatClaims, has been the use of new Catastrophe Models that result in predictions of more Catastrophes such as Hurricanes, and in higher Premiums or Exclusions, than seem justified by authorized and fact-based Catastrophe Models that have been relied on by Insurance Departments, Insurance Companies, Agents and Brokers, and of course ultimately, relied on by Policyholders.  Events associated with that battleground and other largely unreported areas of interest to Insurance Coverage for Catastrophes have been reported here in the categories of "CatClaims" and "Catastrophe Models," along with "Property Insurance" and many other related kinds of Insurance.

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"Review Insurance Policies Now" Says Orlando Newspaper.

   Good advice with related links in this newspaper article published in the Orlando Sentinel, February 22, 2008, by Greg Groeller, "Review Insurance Policies Now".  Every Policyholder and their Agents and Brokers holding every kind of Insurance Policy can benefit from following the good advice published by this linked newspaper article.

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Elder Law and Insurance Contracts.

 The law protects people who are at the beginning of life, in special ways.  In many situations, minors cannot make enforceable contracts.  The law protects them from their own vulnerability to other people who might prey, and those who would not affirmatively hurt children but who nonetheless would not lift a hand or a voice to shield them from their own folly such as entering into an agreement that does not really benefit them but benefits some other party that wants to enforce it.

     It is a concept worth the attention of the law, whether people who are at the ending of life should similarly be protected, in special ways.  In many situations, for their own good, elders should not be making enforceable contracts.  Should the law protect elders from their own vulnerability to other people who might prey?  From their vulnerability to those who would not affirmatively hurt elderly people, but who would nonetheless not lift a hand or a voice to shield them from entering into a harmful agreement that would benefit instead only some other contracting party that seeks to enforce it?

     The current president of the American Council of Life Insurers makes the point that if the law goes the length of incapacitating everyone over the age of 65, then elders will face obstacles in "buying homes or cars or country club memberships or insurance policies."  (Mr. Frank Keating, quoted by Charles Duhigg in "Fine Line:  Shielding Elders' Money, and Independence" p. A1, col. 1 (New York Times Nat'l Ed., Monday, December 24, 2007).  On this Christmas Eve, or at any other time in the rolling Year for that matter, it does not seem as important in the great scheme of things that elders might then have trouble buying country club memberships, as compared to the very real concerns that can arise when elders buy homes or cars or insurance policies.

     However, there is a spectrum of remedies available to consider, and declaring people automatically incapacitated at any age is at an extreme.  Somewhere along the way, the willingness of responsible adults to guarantee performance and to review benefits and obligations, as is the case in many situations with minors, is without doubt worth the attention of the law where elders are concerned.  The linked newspaper article, above, explores the situations faced by elders at which the law ought to look and in which, having looked, the law might decide to take a hand.

    Happy Holidays To All!

Life Insurance Companies Graphically Lead Market Performance.

     The New York Times daily Business Section publishes an Interactive Graphic.  The Times calls its business Graphic a "Sector Snapshot".  This is a regular feature.  It occasionally focuses on Insurance, which was the focus of this Interactive Graphic published on Thursday, October 11, 2007.  (New York Times Business Section, Nat'l Ed., Page C14, Col. 1.)

     Perhaps because Sector Snapshot is an Interactive Graphic, it is very difficult to get a link to it.  Try here.   That should link to the Online Business Section home page of the New York Times; if the link is successful, go down about 3/4 of the way and there you will find Sector Snapshot.  The Times may soon take down the Interactive Graphic about Insurance, and replace it with another Sector Snapshot.  (You can try accessing the New York Times web site if you are not successful with the above link, or if you are interested in comparative business rankings in the Insurance sector or other areas:  www.newyorktimes.com.)

     Notice how most of the Insurance Companies that appear in the two positive boxes, "Leading" and "Improving," concentrate just on Life Insurance.  Life Insurance Companies also account for all but two of the larger circles that represent current market capitalization in the Times' Graphic.  Two of the larger circles belong to the diversified Insurance Companies, Allstate (located in the "Lagging" quadrant) and The Travelers ("Improving). 

    One circle stands alone, larger than all the rest.  The biggest circle belongs to AIG, the proverbial 500 pound gorilla in the room.
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Sigma 2005 and 2006 Results From Swiss Re.

    Swiss Re has released "sigma" results for 2005 and, tentatively, for 2006 to date.  "Sigma" is the Greek codeword used by Swiss Re to identify its computer-based reports.  A link to both reports, released separately by Swiss Re, is here.   The information is revealing.  Here is some of it.

2005

    Total Insurance Policy Premiums in 2005 were $3,426,000,000.00 or 7.7 % of the World's "Gross Domestic Product".  About 56 percent of Insurance Premiums are for Life Insurance.  There is a definite link to commerce here.   Swiss Re notes further that "the growing loan market generated more mortgage-related life insurance policies."  The rest of the Premiums went to pay for what Swiss Re categorizes as "non-life" Insurance Policies.

2006

    So far in 2006, Swiss Re's computer results reveal the third-lowest "insured losses" in the last 2 decades.  The "loss events" studied by Swiss Re's computers show that this year, typhoons and earthquakes predominated among the Catastrophe list and they "hit mainly newly industrialising countries where insured losses are relatively low."  The irreplaceable loss of Life to Catastrophes appears to be proportionately higher than Property Losses to date.  The role of Insurance available to relieve worldwide Catastrophes in 2006 is not necessarily great, it appears.

    Economic losses worldwide in 2006, Swiss Re says, total $40,000,000.00 and so far $15,000,000.00 or 37.5% "were actually covered by insurance."  There is no word on how if at all, the remaining 62.5% or $25,000,000.00 of economic losses is and are addressed in the countries where this year's Catastrophes have struck.

    Remembering to give thanks for our blessings, and remembering to remember those who may not be as fortunate,  Happy Holidays to All!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

 

   

Spin Life: Is it "Insurance?"

                    "You Can't Call This Living, 'cause It Ain't."

    A front-page headline leads today into an article about "spin-life" Insurance Policies.  That stands for speculator-initiated Life Insurance Policies.   One type apparently consists of, first, a loan to a potential Policyholder to pay Life Insurance Premiums and obtain a Policy, followed by sale and assignment of the Life Policy proceeds to the speculator-investor.   Charles Duhigg, "Late in Life, Finding a Bonanza in Life Insurance" (Sunday New York Times,  December 17, 2006, page A1, col. 3.)

    On October 27, 2006, my post addressed the issue of "life settlement" agreements.  Those are arrangements in which people with great pain, or who are near death, sell the proceeds of their life insurance policies in exchange for money to pay current medical and other bills to continue daily life.  Today's linked article, above, lumps "life settlement" agreements with "spin-life" premium arrangements .

    Public Policy issues are many here.  However, one highly practical Insurance issue deserves immediate focus.  It is driven by economics and it is this:  Life Insurance Companies depend on historical evidence, like other Insurance Companies, to determine whether they will accept a risk and if they accept the risk, what kind of Policy they will issue and what Premiums they will charge the Policyholder.  The historical evidence summarized very well in today's article displays the fact that many Policyholders cancel their Life Insurance Policies.  That is a fact and Life Insurance Companies plan on this fact.  They include it in their basis for charging Premiums.

    If instead all or nearly all Life Insurance Policies now in effect will produce payouts rather than Policyholder-cancellations, there may not be any Life Insurance available over the course of time, or what Life Insurance is made available will carry a very high Premium, because of the great increase in risk.  The issues are addressed further in today's linked newspaper article.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

One-Stop Shop Insurance Sales: Returns?

    Premiums Accepted For Life, But Not For Property Insurance.   

    Huge CatClaims in 2004 and 2005 and large profits in 2006 have been the subjects of previous posts here.  One possible approach to the combination of these twin facts involves two steps.   Proponents see the two steps together as leading to even greater profits in the Insurance Industry.

    The first step these persons see is to eliminate risk.  This involves  eliminating all CatClaims Coverage such as in Florida.  Steps to eliminate CatClaims Coverage include cancellation of existing Homeowner's Policies where permitted, or issuing renewal Policies with what are in effect total CatClaims Exclusions where authorized, or not issuing Homeowner's and other First-Party Property Policies at all.

    The second step is to divert resources from the eliminated risk to  a different  source of profit.  Financial planning products for targeted prospects make a favored source for proponents of this method.  Targeted prospects are not limited by geographical location under this plan.  Prospects for financial planning products can live anywhere.  So long as prospects possess the capacity for Life Insurance Policies or for such other financial products as annuities, they qualify as targets under this approach.  Some label this second step as the much-attempted 'one-stop shopping' goal for selling Insurance.  One of the major Insurance Companies reportedly chooses this double approach, reported for example in this Subscription Required Article by Liam Pleven, "Hurricane Losses Prompt Allstate to Pursue New Path" (Wall Street Journal, Friday, November 24, 2006, page A1, col. 1)(Subscription Required).

    Consider something else, however.  If a prospect for Life Insurance is not a prospect for CatClaims Coverage -- because she or he cannot obtain Homeowner's Insurance for example -- then that prospect cannot live just anywhere if they want to be protected against CatClaims.  Businesses have their own issues obtaining CatClaims Coverage in Hurricane or Earthquake or other Catastrophe prone areas, but businesses cannot locate to any geographical area where employees are not available to staff that business.  Florida is not alone in bracing for these effects although the double approach to Insurance Profits outlined above hits Florida very hard.  Other States and their locales which will feel the effects of a double approach of the kind outlined in this post include the Gulf Coast -- Texas, Louisiana, Mississippi, Alabama, and Florida -- and also the Atlantic Coast from Florida north to Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, New Jersey, New York, Connecticut, and Rhode Island.

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.