Why Does the Life Insurance Industry Have a PERFECT Record? Heavy Audits and Ratings.

As stated in our “PERFECT Record” edition of Latest News, “Life insurance companies are heavily audited and rated on their claims paying ability.”

The National Association of Insurance Commissioners (NAIC) has established state audit guidelines known as the NAIC Model Audit Rule. Each state’s specific audit requirements may be found here: https://www.naic.org/documents/prod_serv_fin_receivership_cpa_zu.pdf.

NAIC audit requirements apply to auditing all licensed or authorized insurers. Size exemptions are allowed for insurers having direct premiums in their domestic state of less than $1,000,000 in any calendar year and having less than 1,000 policyholders nationwide, unless reinsurance premiums exceed $100,000. Exemptions are allowed for filing in other states if Audited Reports are deemed substantially similar and an Audited Report, Internal Control Report, Qualification Letter and Notification of Adverse Action Condition are all filed.

From the NAIC Model Audit Rule: “All insurers shall have an annual audit by an independent certified public accountant and shall file an audited financial report as a supplement to the annual statement on or before June 1 for the year ended December 31 immediately preceding. The domiciliary Commissioner may require an insurer to file an audited financial report earlier than June 1 with ninety (90) days advance notice to the insurer.”

Should any insurance company fail an audit, each state is equipped to take that company over.  Each state has a guaranty fund to protect that state’s policyholders and there has never been a case where any state in America has ever failed to protect its policyholders. The auditing policies in place work for the benefit of consumers and each state is well-equipped to protect those very same consumers.

In addition to state audits, life insurance companies are rated by five independent ratings agencies; A. M. Best Company, Fitch Ratings, Kroll Bond Rating Agency (KBRA), Moody’s Investor’s Services, and Standard & Poor’s Ratings Services.

A. M. Best Company – A. M. Best is the world’s very first insurance credit ratings agency. Best was founded all of the way back in 1899, in New York City. This ratings agency is the largest credit ratings agency that specializes in rating life insurance companies. A. M. Best rates 16,000+ insurance companies worldwide.

Fitch Ratings – Fitch rates companies in 30+ countries. The agency is owned by Hearst Communications, which is in its 132nd year. Hearst’s annual revenues are approaching $12 billion annually.

Kroll Bond Rating Agency – KBRA is a newcomer to the industry as it was founded in 2010.  The agency refers to itself as a “challenger brand” and brings a new perspective to a long-standing and stable industry. The agency has created new risk assessment standards and is the self-proclaimed “pioneer of the modern investigations, intelligence, and corporate security.”

Moody’s Investor’s Services – Moody’s is a 100+ year-old agency that rates companies in 40+ countries. Moody’s has 11,000+ employees.

Standard & Poor’s Ratings Services – S&P was founded 160 years ago in 1860. The agency rates companies in 128 countries and has rated $46.3 trillion in debt.

With the life insurance industry’s heavy audits and ratings by the five global ratings agencies, anyone would be hard-pressed to find a safer industry anywhere. These are just two of the reasons why the United States life insurance industry has never failed to pay a legitimate claim in its entire history. The life insurance industry’s heavy audits and ratings are two good reasons why any insurance advisor would be wise to direct his or her clients to life settlements.

For more information on the life insurance industry’s PERFECT record, heavy audits and ratings as well as how Senior Life Settlements provide more options for your clients, call West Coast Settlements at (657) 254-4300 or send an email to info@westcoastsettlements.com.