Posts filed under 'AIG'
One of the considerations when you are putting together a life insurance program or portfolio should be flexibility, a way to deal with the “what ifs” in life.
I’ve seen this a little more than usual as people have dealt with different aspects of the recession. They put a policy in force prior to the economic meltdown that, if there hadn’t been a meltdown, would have been just fine. With everything getting tighter, suddenly the once budgetable premium on that $2,000,000 policy isn’t working anymore.
The first thing to look at is the mode you are paying. Most companies offer options of paying annually, semi annually, quarterly or monthly, monthly almost always being done by automatic bank draft. Can changing you modal premium from annually to monthly solve the issue? I know if I was facing tough times and got a bill for say, a $5000 annual premium I would probably been inclined to cry. But if I could change to monthly and pay a little over $400 a month for a while (or from now on), that might be a way to save the day and keep the insurance in force just the way I want it.
Now I know this is crazy, but a lot of companies won’t let you alter a policy once it is in force. In other words, if you decide that you can really be OK with $1,000,000, will the company allow you to cut the amount of coverage in half. I just did this for a client with Prudential and they were very gracious about it. I tried the same thing for a client not too long ago with AIG American General and they wanted the client to apply to have the face amount of his policy lowered, exam and all. When we ran into that I suggested that if an exam was required, let’s shop it and see if AIG was really the best bet at that point anyway. Turns out they weren’t and because they weren’t flexible they lost the business.
A way to proactively pave the way for this possibility is to take out more than one policy. I encourage a lot of clients to do this if they don’t believe they will need the full amount for the full term length, or at least they’re not sure. Instead of a $2,000,000 20 year term, why not two $1,000,000 20 year terms, or a $1,000,000 and two $500,000 term insurance policies. The very small downside to this approach is that each policy has an annual policy fee of $50-$75, so if you have multiple policies you could be paying slightly more. Transamerica has just put a program in place where if you do what I just described they will only charge one policy fee and give you the advantage of any price break that the total face amount might bring. Even without that advantage, multiple policies is still worth considering.
Bottom line. If it can be helped, don’t back yourself into a corner where a budget busting event can leave you making a choice to go completely without life insurance.
May 15th, 2009
Let’s face it. If you want to turn a few stomachs in a discussion about the recession all you have to do is throw out the name AIG, the epicenter of the current economic meltdown. AIG owns life insurance giant American General.
So, if you can control your gag reflex, should you actually consider American General as a company to apply with? I am as cautious as the next guy, but I think there are a couple of real upsides to going in that direction. Keep in mind that American General is not AIG, but rather they are owned by AIG. American General is a very respected and very profitable life insurance company, something that will bode well for AIG and all of us taxpayers as AIG begins to shed assets and start repaying debt.
My two thoughts go something like this. Historically when companies are positioning themselves for sale, their underwriting relaxes a bit. It doesn’t get sloppy, just maybe not quite as tight as a year ago. The more paying business they have on the books, the higher the value to potential suitors. With giants Met Life and AXA Equitable doing more than just sniffing around, the good news for AIG and I think for policy holders is that there are good companies out there big enough to write the checks.
The second upside is that when a company buys a block of term insurance business, by law the purchasing company has to honor all of the guarantees of the original company. Not unlike having a mortgage sold, the check may go to someone new, but the payments and contract remain the same.
Personally I think Met Life will win the day and to me that is good news for anyone that has American General life insurance. Heck, that’s a no cost upgrade since Met Life is a higher rated company than American General anyway.
Bottom line. Don’t let a knee jerk reaction to AIG spill over into passing up a good deal with American General. American General is a solid company that will end up being owned by another solid company.
April 30th, 2009
I got a Matrix Direct email today that may shed a little more light on one of the reasons AIG isn’t cutting it. AIG’s American General Life owns the big on line agency Matrix Direct. Not a bad idea for a company that has done so well on line to have their own mega agency!
The thing that kind of threw me with their advertising was when you click on the tab for “companies” and get a list of notables such as ING Reliastar and Prudential. At the top of the list is American General and at the bottom of the page in the fine print section is a note saying that Matrix Direct is a subsidiary of American General.
Now there’s certainly nothing illegal about the whole deal. I’m not even sure there is anything overtly stupid about it. It was just one of those things that struck me as truly odd. Here is an agency that is wholly owned by a life insurance company. So the life insurance company is claiming the profits of this agency on their books. The agency is selling for a lot of companies and therefore American General if profiting from the sale of insurance for other companies.
Bottom line. I guess I think it’s a good idea if it will help AIG make a little money that they can throw toward their debt
April 22nd, 2009
There are a lot of people that are suspicious of the whole annual review process on your insurance. It is perceived to be a thinly veiled attempt to sell you more insurance, and I have to admit that with some agents that may be true, but not always. It’s worth consideration as a valid practice.
I have a client that I have been working with for 4 years now. He has a history of a type of lymphoma that can certainly kill you, but if it doesn’t, the further you get away from the scene of the accident the less likely it is to have any impact at all. As he put, “if it doesn’t kill you and goes into remission, it is as good as cured. It doesn’t come back”.
When we first met he had not found anyone that could get an approval. He had been declined for life insurance several times. After he explained the “if it doesn’t kill you” scenario, with him being a physician and a clinical pathologist, I asked him to write something that I could present to underwriters and accompany that with some documentation and see what we could do. That year we did get an offer from Empire General (now Protective Life) and he accepted the highly rated offer. His annual rate for the $1,000,000 term insurance policy was nearly $12,000, but it was a victory and for him relief that he had finally been able to secure life insurance for his family.
The next year when I called for his annual review we discussed how we had been able to pull him out of the decline spiral and get a policy. I asked him if he thought he could put together a more comprehensive package to present to underwriters in order to shop it and see if we could get a better rate. This time Banner Life came through with a substantially lower rate and we were able to secure the same policy for $7800 a year.
Needless to say he was pleased and asked if we could give it a try again the next year. He put together more documentation and this time we were able to get a modestly rated policy with AIG American General for $4980 a year. Which leads us to now and today I just sent him a new application with Banner Life as we just received a tentative offer at standard plus rates which will bring the annual premium down to $3800 annually.
Things were just perfect for us to be able to achieve the results we did. First, the client was totally committed to doing whatever was needed to secure insurance. That is a breath of fresh air when a lot of clients won’t even make a phone call to help their own cause. It also helped that he was an expert in pathology and knew how to build a factual case for what he felt was fair treatment, given his specific type of cancer. I know most clients can’t come to their own defense in that way, but given records and facts, we can put together the same type of battle plan for most clients. And lastly it helped that with each year and each good checkup his claim of “if it doesn’t kill you” became more solid.
I wish we could have success like that in all cases, but we don’t. Having said that, we do help people improve on their original approval all the time. I keep meticulous notes on exactly why a client didn’t get what they wanted and I let them know when they put a policy in force exactly what it will take to improve on their rate. When I call for their annual review they know exactly what my mission is.
Bottom line. Annual reviews are good for the client as long as the agent has a commitment to service with sales. No doubt there will be times when a new policy is appropriate and that’s OK, but just as important is a client knowing that the agent is keeping them up to date and making sure their questions are answered and needs are taken care of.
April 8th, 2009
Since AIG hit the skids last fall I have been keeping clients and readers on top of the “what ifs” with their life insurance branch, American General. AIG’s recession slide has been a boondoggle of epic proportions with nearly $150 billion of bail out money coming their way and their just announced $60 billion loss.
I’ve mentioned several times that at some point AIG will put their life insurance branch up for sale. They have to. It’s profitable and can bring a large chunk of change to start paying down the enormous debt they have to you and me. Today two companies announced an interest in purchasing that branch. There may be more interest, but at this point it appears that Met Life and European giant AXA have expressed an interest.
Both companies are financially stable and have the assets to pony up billions. For AIG life policy owners it is important to remember that the policy guarantees in their current policy, by law, have to be carried over by any company to acquires that block of business. The swing issue to watch is the conversion option. AXA has a history of offering horrible products for conversion.
Bottom line. I think it is past due for AIG to start to un-jumble its’ assets and get to work either righting the ship or paying back the taxpayers and sinking the ship.
February 25th, 2009
Anyone who has health insurance has already, or will soon find out the frustration of having insurance that doesn’t have all of it’s features guaranteed. At any point the dreaded letter can come and your copay can change, your premium can change or your deductible can change.
It’s not because you’ve done anything wrong. In fact the most infuriating thing is to have your premium raised on a policy that you’ve never even used, but it happens. It’s also, like it or not, not because the health insurance companies are inherently evil or greedy. From their end with skyrocketing health care costs and drug costs, it simply comes down to things have changed and in order to stay in business, which is in your best interest, everyone has to chip in more money.
Life insurance isn’t subject to similar forces and therefore has the ability to guarantee all the provisions in a policy. They can guarantee that your death benefit and the premium will remain level for whatever period you choose. The question occasionally, especially lately, comes up about what happens if a company goes out of business? In a nutshell, the block of business is purchased by another company and by law the new company has to guarantee that the guarantees remain guaranteed. Just an FYI. The reason I can confidently state that the block of business will be purchased by another company is that, when it comes up for sale, it is a bargain. A new company can pick up that business without the cost of underwriting. Pennies on the dollar for an ongoing revenue stream.
Now lest someone jump all over me and point out that not all life insurance is guaranteed, let me be open about that. Agents can choose to sell and clients can choose to buy non guaranteed policies. Traditional universal life and variable universal life are the biggest culprits in this area although you will occasionally find term insurance and whole life policies that aren’t guaranteed as well.
A non guaranteed policy is generally sold in a competitive situation when an agent wants to win a sale by presenting a lower price. Since there is usually a higher cost to guarantee than not guarantee, if an agent can convince a client that there is little or no danger in a lack of guarantee, the lower price can win the day…..for the agent. So, what is a non guaranteed policy and why would someone buy it?
All universal life policies have an accompanying illustration with two sides to it. One side shows the guaranteed values, what the policy will do even if the bottom drops out of everything. These guarantees are based primarily on mortality experience, company performance and interest rates that the company earns on it’s money. This is a worst case assumption. The other side of the illustration is called the non guaranteed or current side. If it is a non guaranteed assumption they are making a wild guess assumption about future performance in the same areas described above. If it is a current assumption they are assuming that those values that are true today will remain true in the future. A non guaranteed policy is generally sold by making the client focus on the assumptions and saying things like “AIG has met its’ assumptions for the past 15 years. They’re huge and there is no reason to believe things will change”. The guaranteed side might show that a worst case scenario has the policy lasting just a few years if things don’t go right. “But trust me, AIG is a wonderful company……”.
Buyer beware! The truth is that most universal life policies in the hands of policy owners today are not guaranteed and it is rocky financial times like this that will bring the house down. It comes in a letter stating something like, “Your $3500.00 annual premium is no longer sufficient to support the assumptions of your policy. In order to continue your policy at its’ current death benefit your premium for 2009 will be $5600.00″. And guess what, once a policy turns south like that, it’s just like geese migrating. It’s going to happen every year.
Bottom line. Life insurance can and should be guaranteed and you, as a consumer, should insist on your agent showing you the guarantees in writing. If you have an agent that wants you to believe in anything other than guarantees, find another agent, a reputable independent agent.
Another FYI. While I suspect AIG’s non guaranteed product clients are in for a rude awakening, their guaranteed products will remain intact whether they are kept with AIG or sold to another company.
January 31st, 2009
In these unprecedented financial times it is a breath of fresh air when a company is willing to not only be transparent, but also lay out step by step their game plan for survival. With consumer confidence at an all time low I would like to see more companies like Genworth Life and Annuity show us what they are doing to protect our life insurance investment.
Hinerman Group has always had a policy of being transparent and when I received this communication from Genworth, I felt it was worthy of passing on. genworth-strategic-highlights-11-11-08
I think, truth be known, that most of the big insurance companies are taking similar steps and I truly believe that people can have confidence in their life insurance given my oft mentioned caveat, your policy is based on guarantees.
If you have been sold or made the choice to purchase a policy that was based on assumptions, review it now and be ready to act. Most term insurance policies are guaranteed and should be safe. At highest risk is the giant pool of underfunded universal life policies in the hands of people who haven’t been serviced by the selling agent since he strolled to the bank with his commission check. If you have a universal life policy it is time to have it reviewed and please, have it done by someone other than the agent who sold it. It is my belief that the majority of universal life policies in force today were sold inappropriately and are at risk. Don’t get your second opinion from the original source.
Bottom line. There is much to be confident about in the life insurance industry. Even American General, the life insurance branch of AIG is solid. The rest of AIG is questionable, but American General’s guaranteed policies are still good and will be no matter what the end of the AIG saga brings.
November 14th, 2008
I was not in favor of the AIG bailout when it was “just” $85 billion, but knowing that AIG has the assets to sell to pay that off, and knowing that the government had taken control of the company, I decided that possibly more brilliant minds than mine really did have a plan.
When, less than 2 weeks later, the bill grew by another $34 billion I was starting to have a little less confidence that things were being handled correctly. Why wasn’t AIG or the government selling off assets and decreasing the price tag? I think it’s important to keep in mind that selling off those assets doesn’t hurt the people that are insured. It simply means the beginning of the end of a company that made some lousy choices. Survival of the fittest?
I woke up yesterday to an additional $40 billion going into the company and to date we have yet to hear of an asset being sold. There are companies lined up ready to buy AIG subsidiaries like American General Life Insurance, so why are we continuing to pour gold in to attempt to fill this money pit.
So, congress approves essentially $1 trillion to get our economic train back on the tracks and to date nearly 1/6th of that has been spent on one company. What’s with that plan of attack? Where’s the explanation for why that was needed? Where is the plan for how and when we will begin to see AIG dismantled and sold off to get taxpayers off the hook? Who the heck is in charge?
Bottom line. The best we can hope for is that this whole bailout thing is handled professionally and meticulously and with oversight and oversight on the oversight. If that happens it has a chance of accomplishing its’ task. So far I’m not convinced that we are seeing the best we can hope for.
November 11th, 2008
Following the recent bailout/takeover of AIG by the government, other life insurance companies including Prudential are holding their hands out wanting a little of our tax money to soften the impact of their unwise investment in risky real estate loans.
Investment of premium dollars is, of course, one way that insurance companies can take small premiums and hold out the promise of large death benefits. But the truth is that this is more true in cash value policies such as universal life and whole life. Term insurance seems more self sustaining simply because of the anomaly I’ve written about before where most term insurance policies never get to the point of a death benefit because they are either lapsed by the insured or the insured lets the policy go at the end of the guaranteed term.
I can’t seem to find the article now, but if my memory serves me Prudential was asking the Fed for a little less than $2 billion to help defray the poor performance in their investment portfolio that supports cash value policies. I had a hard time wrapping my mind around the $120 billion AIG fiasco, not quite knowing what to think, but this one seems to me to be a case of companies trying to get off easy and not bother their policy holders about their goof up.
Keep in mind that this problem with their investment strategy doesn’t impact guaranteed policies, but it can be slam dunk detrimental to variable universal life and UL’s that rely on assumptions and not on guarantees. It seems to me that the appropriate thing for the company to do is to exercise its’ option to raise the rates on all of those policies to offset their losses. I know that makes me sound mean, but non guaranteed policies are non guaranteed for a reason. It allows for potential upside gains and it also allows for risk to hurt those who choose to insure themselves in that way.
Bottom line. I don’t think I agree with the AIG bailout, but I darn sure don’t think insurance companies need to start lining up to beg for help that they should be able to put together internally.
October 27th, 2008
I was talking to a friend yesterday who, like many of us, is trying to compute how many additional years he will have to work to make up for the money he has lost from his assets over this past month. He calculated that he would have to work an additional 1.5 years to make up his losses just over the last two weeks.
He jokingly went on to say that the good news he will only be 111 by then and should still have a few good years to enjoy his retired life.
I know the state of our economy is no laughing matter and that for all of us who have been working long and hard for everything we’ve socked away, this last month has had kind of a smothering effect on our collective psyche. I know after the AIG fiasco, there might be a few skeptics out there when it comes to insurance, but the truth is that life insurance is an inexpensive way to make sure that your retirement plane really doesn’t go down in flames.
I know the closer you are to needing that money, the rougher things look. They keep saying that if you have 10 years before retirement, don’t worry, be happy. So what happens if you’re not worrying (which I recommend) and are being happy (ditto on that) and you die and your spouse is left without your income and a retirement fund that has taken a direct hit with a small nuclear weapon?
The answer is life insurance. And if all of the experts are right and 10 years will make the difference, good news…..10 year term insurance is the least expensive product out there. If you don’t trust the experts, take out a 15 or 20 year term policy. For the huge protection you can buy, the outlay is minimal especially considering the alternative.
Bottom line. Do your own bailout and make sure your estate, your networth, your nest egg, is protected.
October 10th, 2008
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