VA Companies

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Nov 5, 2008 2:07 pm

I've had a few conversations with clients about their VA's.  Of course, I remind them of their guarantee, but lately I've heard, "Well what happens if the insurance company goes tits up?"


How, besides, "Ummm...uhhh...hmmm....mmmm...well, yeah, that's not good" would you respond?

Nov 5, 2008 2:22 pm

If the Insurance Company fails, then the Reinsurance Company kicks in (if applicable).  If the Reinsurance Company fails, then there's the state guaranty funds kicks in.  If the state guaranty funds fail then you're up the creek without a paddle.

Nov 5, 2008 2:38 pm

If the state fails, our monetary system as a whole has collapsed, so those greenbacks in your wallet will be worth the same as those confederate dollars I bought as a kid from the giftshop at the history museum. 

 
Perhaps you should learn to grow some veggies and to milk a cow by hand instead of worrying about this insurance company failing.
Nov 5, 2008 3:19 pm

Also good to ask brush up on the histories of some of these deals.  Conseco is a good one:
http://query.nytimes.com/gst/fullpage.html?res=9807E6DC103DF93AA25751C1A9649C8B63

They went bust years ago, and CFN Investment Holdings bought them out.

As far as I know, anytime an insurance company has gone under, the entire industry has stepped in to prevent it/schedule a buyout.  Again, as far as I know, policies have always been honored by the purchasing firm.  If this sort of thing didn't happen, who would trust insurance companies? 

But yeah, pull up your State's Life Insurance/Annuity guarantee website.  Most states have a handy FAQ that can walk through the process so that you know it. 

Nov 5, 2008 3:41 pm
gvf:

Also good to ask brush up on the histories of some of these deals.  Conseco is a good one:
http://query.nytimes.com/gst/fullpage.html?res=9807E6DC103DF93AA25751C1A9649C8B63

They went bust years ago, and CFN Investment Holdings bought them out.

As far as I know, anytime an insurance company has gone under, the entire industry has stepped in to prevent it/schedule a buyout.  Again, as far as I know, policies have always been honored by the purchasing firm.  If this sort of thing didn't happen, who would trust insurance companies? 

But yeah, pull up your State's Life Insurance/Annuity guarantee website.  Most states have a handy FAQ that can walk through the process so that you know it. 

 
The question I have is that if the parent company goes under, and the subsidiary, which owns the annuities is sold off, do the VA guarantees go with the new company?
 
Example:
 
ING is the parent company.  ING Annuities is the subsidiary, and is currently profitable.  If Allianz buys ING Annuities, are the contracts between the client and ING Annuities still good?  If so, living benefits would be honored.  If not, the guarantees are gone.
Nov 5, 2008 3:46 pm
snaggletooth:
gvf:

Also good to ask brush up on the histories of some of these deals.  Conseco is a good one:
http://query.nytimes.com/gst/fullpage.html?res=9807E6DC103DF93AA25751C1A9649C8B63

They went bust years ago, and CFN Investment Holdings bought them out.

As far as I know, anytime an insurance company has gone under, the entire industry has stepped in to prevent it/schedule a buyout.  Again, as far as I know, policies have always been honored by the purchasing firm.  If this sort of thing didn't happen, who would trust insurance companies? 

But yeah, pull up your State's Life Insurance/Annuity guarantee website.  Most states have a handy FAQ that can walk through the process so that you know it. 

 
The question I have is that if the parent company goes under, and the subsidiary, which owns the annuities is sold off, do the VA guarantees go with the new company?
 
Example:
 
ING is the parent company.  ING Annuities is the subsidiary, and is currently profitable.  If Allianz buys ING Annuities, are the contracts between the client and ING Annuities still good?  If so, living benefits would be honored.  If not, the guarantees are gone.
 
In your hypothetical situation, I couldn't see how the living benefits couldn't be honored.  I say this because my term policy (just another insurance product) has switched hands at least 3 times.  The new company will still honor my contract.
Nov 5, 2008 4:07 pm

Snag,

I've never seen it spelled out that they have to be honored.  However, like the code among thieves, it's just one of those things they won't do.  They would shoot the whole insurance industry in the foot if someone refused to honor the guarantees. 

Nov 5, 2008 4:34 pm
gvf:

Snag,

I've never seen it spelled out that they have to be honored.  However, like the code among thieves, it's just one of those things they won't do.  They would shoot the whole insurance industry in the foot if someone refused to honor the guarantees. 

 
Oh I agree with you man, and everyone else on this thread. 
 
It's just not enough to tell a client that there is a similar code among thieves.
 
I mean, a lot of us and our clients, put faith in these annuity guarantees. 
Nov 5, 2008 6:22 pm

Snags,

Call one of your internal/externals.  They love talking about this stuff.  And they, of course, could point you to the language in the contract that might spell out a more specific answer to your questions. 

Nov 6, 2008 9:32 pm

Quick input guys, the state guaranty association ONLY applies to death benefits and the insurance company's GENERAL account. Applying that to our thread, that would mean fixed annuities would be guaranteed by the state, any assets in the fixed account of the variable annuity would also be guaranteed.

 
However, NO living or death benefits attached to a variable annuity would be backed up by the state guaranty association. i.e GMIBs, GMWBs, etc.
Nov 20, 2008 7:04 pm

Here's a link to the entity that helps the various states in case of an insurer being seized. http://www.nolhga.com/home.cfm 

Nov 20, 2008 7:13 pm

Let me add, what I found on the CA L/H Guarantee Assoc site: (read it & weep)

 
"Are covered life insurance and annuity policies fully protected?
No. The maximum amount of protection for which the Guarantee Association may become liable for life insurance and annuity policies is as follows: Life insurance death benefit protection: 80% of the policy death benefit up to a maximum of $250,000; Life insurance net cash surrender and net cash withdrawal values: 80% of the policy value up to a maximum of $100,000; Present value of annuity benefits including net cash surrender and net cash withdrawal values: 80% of the present value up to a maximum of $100,000. Life insurance benefits including net cash surrender and net cash withdrawal values, and annuity benefits including net cash surrender and net cash withdrawal values are subject to interest rate adjustments. Generally, interest rate reductions are made when an insolvent insurer promised a rate of interest in excess of that provided for in the California Life & Health Insurance Guarantee Association Act. The maximum total amount the Guarantee Association will provide for any one individual for life insurance and annuity coverage is $250,000, even if that individual is covered by multiple life insurance policies and annuities"
Nov 21, 2008 12:20 am

BBQ, sounds good, I could really really go for some okra right now, maybe some fried chicken too.

 
Look, if insurance policies get to the point where people are f'd out of the benefits across the board, I will get sued, probably go to jail, or if I'm lucky enough to not do either of those, I will find a different job.
 
We'll see.
Nov 21, 2008 1:18 am

p.s. you're not supposed to use the CA life insurance guarantee association as a feature to sell the annuity/insurance/etc. 

Nov 21, 2008 6:23 am

The last thing that I would worry about is life insurance death benefits.  If any company's death benefits don't get paid 100%, that would be the end of the industry as we know it.

Nov 21, 2008 8:29 am
anonymous:

The last thing that I would worry about is life insurance death benefits.  If any company's death benefits don't get paid 100%, that would be the end of the industry as we know it.



Well said.