by tcope » Wed Sep 17, 2008 02:48 am
I remember at least one person mentioning how much the insurance industry made last year and how this was a record amount. I pointed out that they did not consider that insurance is not like banking... those profits can _easily_ be lost.
Well, take a look at what a beating that most carriers are taking in the Midwest and the south. Billions of dollars are being spent on losses. I know the company I work for is paying more in those areas then they collected in premiums.
Then look at a company like AIG. Granted, mental defects were at the reigns but this is just another example of how insurance companies _do_ loose money and go belly up. Who would have questioned an insurance company stability or thought an insurance company as large as AIG could be in trouble. Also, look at the repercussions of that news.
Well, take a look at what a beating that most carriers are taking in the Midwest and the south. Billions of dollars are being spent on losses. I know the company I work for is paying more in those areas then they collected in premiums.
Then look at a company like AIG. Granted, mental defects were at the reigns but this is just another example of how insurance companies _do_ loose money and go belly up. Who would have questioned an insurance company stability or thought an insurance company as large as AIG could be in trouble. Also, look at the repercussions of that news.
Posted: Wed Sep 17, 2008 02:58 pm Post Subject:
But Fatman..I'm sure you'd agree that more of complaints over the years & that too if it is recurring in nature would automatically signify that the company has not been able to tackle their problems in that respective area of operation. Once too many complaints are being lodged against a particular insurer, it is easier for a policy applicant to check with the state DOI & find out the real reason.
Not always true... a company who writes more policies is going to have more complaints. A company that writes non-standard policies is going to have more complaints. It's a good to know how many complaints a company has but the person needs to also understand the variables above.There is a plaintiff attorney that runs a website disguised as a consumer oriented site and it lists the carriers in order of complaints. You will see the largest companies on top and the smaller ones on the bottom. If a company wrote a million policies and had 1000 complaints they would be doing much better then a company that wrote 100,000 policies but only had 500 complaints.
Posted: Thu Sep 18, 2008 05:33 am Post Subject:
Hi,
One important thing is to see if a company has IMSA membership. If it has IMSA membership, then it must be a promising one. It signifies that the company has passed over the stricter parameters of (i) sales (ii) marketing & (iii) customer service. Even when a company has achieved this membership, they would need to go through these rounds of evaluation over & over again each passing year. IMO opinion that's certainly one good parameter to judge the stature of a company.
Regards, ArindamSenIndies
Posted: Thu Sep 18, 2008 06:14 am Post Subject:
Dear Arin..
That's quite okay to think that in order to build up goodwill & trust you would seek an IMSA membership. But remember you may also evaluate the various life insurance companies using the free online life insurance quotes tools. There are many companies that would not only mail you their own quotes but would also let you compare the different rates offered by various other providers. So, now its your choice to pick it the way you feel its right!
Evan
Posted: Thu Sep 18, 2008 06:51 am Post Subject:
Fatman, its not always about judging the company by reading its prospectus. The current financial crisis has deeper roots.
I'm with tcope, its difficult to understand a company's performance from outside. AIG is one perfect example of the current market uncertainties. The recent financial turmoil is capable of turning a big cheap company to a recipient of a Fed bailout in one night.
The downfall of AIG can be attributed to its inability to react fast enough towards the change trends of the market. And the same is happening to many others as well.
Another factor is the natural calamities, which are unsettling the US costal areas repeatedly. A huge amount of money is flowing out towards paying the claims.
Experts are describing the current market recession with the Great depression, which had once taken the US market to the bottom low. We can only hope that the market stabilizes soon.
Posted: Thu Sep 18, 2008 07:23 am Post Subject:
Quite true, the financial crisis is not only hitting the insurance companies, rather its affecting the overall financial market.
The insurance companies don't earn their profit only from what they gather as premium, rather they also invest their money into various stocks and shares. The recent market slump has also made them lose a great deal of money, part from the claim payouts.
Often a big natural calamity is enough to throw an insurance company off the bridge. Now if the insurer is required to pay out huge claims when its earnings from the other sources have dried out, its bound to face the financial crisis.
However, checking out with the rating companies would definitely help the customer in deciding before choosing the insurance company. Jeorge
Posted: Tue Sep 30, 2008 01:46 am Post Subject: Lori _ I disagree
There are not a lot of carriers in trouble. Profits are down but that is part of the insurance cycle. There is been so much rate dropping that it is starting to catch up with the carriers results. If I am not correct a record low number of carriers went under last year.
AIG's problems are as a result of the poor investments of the parent company and not the results of the carriers.
I asked a insurance company president when the market might harden and he said 3-5 years. There is not enough blood in the streets. The losses on the investment side might help speed things up with underwriting results deteriating. Itr is my understanding that reinsurance pricing is starting to rise.....
Posted: Tue Sep 30, 2008 01:58 am Post Subject:
AIG isn't a good example to use when referring to Insurance company stability.
AIG's downfall had little to do with their insurance branch. It is largely due to involvement in a kind of unregulated derivative called credit default swaps. AIG earned huge premiums in exchange for guaranteeing another company's mortgage investments if the mortgages defaulted. They bet that many of the mortgages would never fail, but an unusually high percentage did.
Of course, had they not paid so much money in fines through the last few years, who knows what would have happened:
2005 - New York Attorney General Eliot L. Spitzer (remember him?) and the SEC accused the company of fraudulent financial reports. An investigation found evidence that the company was playing down losses and risk, using sham transactions to companies that were not independent of AIG. The company settled the case by paying a record $1.6 billion in fines.
2004 - AIG agreed to pay $126 million to settle another multi-layer probe, in which the SEC and Justice Department said the insurer had engaged in accounting fraud by concealing the nature of its transactions with a bank subsidiary and cellphone company.
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