Why Does the Life Insurance Industry Have a PERFECT Record? As stated in our last edition of Latest News, “Most life insurance companies have huge surpluses, and many have been paying claims for more than a hundred years.”
In mutual companies owned by policyholders, surpluses are the company’s assets minus its liabilities. Surpluses are an indicator of a company’s financial soundness. In the event a mutual life insurance company ever has to pay a higher than expected amount in policy claims, its surplus is another source of funds that may be used to pay them. This is in addition to the company’s reserves and any reinsurance it has on those policies. In publicly owned life insurance companies, also known as stock companies, each company’s assets minus its liabilities is known as shareholder’s equity. In the event of higher than expected claims, shareholder’s equity would merely be reduced in the absence of reserves and reinsurance.
In my home state of Florida, Life Insurers MUST maintain the greater of $2.5 million or 4% of the insurer’s total liabilities (F.S. 624.407). In West Coast’s home state of Georgia, Life Insurers MUST maintain a minimum capital and surplus of $3,000,000 (O.C.G.A. §33.-3-6 and 33-3-7). To see the requirements in your state, go to the National Association of Insurance Commissioner’s site at: https://www.naic.org/documents/industry_ucaa_chart_min_capital_surplus.pdf
How does meeting these surplus requirements help life insurance companies stay solvent and pay claims? Huge surpluses are one of the reasons that The Equitable Life Insurance Society, the world’s oldest mutual life insurance company has been paying claims for 258 consecutive years beginning in England in 1762. And, in America as The Equitable Life Insurance Company, the life insurer has been PERFECT for over 160 years since 1859.
In 1992, Equitable demutualized and became a stock company. During that same year, AXA one of the world’s largest financial services companies made its initial investment in Equitable. The transition from a mutual company to a stock company was seamless as Equitable continued its PERFECT record of paying claims. After this article’s author became the #1 producer at Mutual of New York (MONY) in 2002, MONY was purchased by Equitable which changed its name to AXA Equitable in 2004.
Other great American examples of PERFECT records of paying life insurance claims are New York Life and John Hancock. New York Life’s enormous surpluses have allowed that company to pay claims each and every year since 1845 for a PERFECT 175-year record. Massive surpluses have helped the John Hancock Life Insurance Company pay claims each and every year since 1862. That’s a PERFECT 158-year history.
Remember the largest financial crisis to hit America this century. From the 2008 mortgage meltdown to today’s date, there have been 20 insurance company failures. In every single case, the life insurance industry maintained its PERFECT record of paying claims through company surpluses, shareholder’s equity or by life insurance company’s merely buying other companies outright. Not a single policy owner or beneficiary lost a dime.
By contrast, during that same time America experienced 529 bank failures and the banking industry failed to maintain a PERFECT record. Much of that is due to the FACT that “Most life insurance companies have huge surpluses, and many have been paying claims for more than a hundred years.”
For more information on the life insurance industry’s PERFECT record, company surpluses, claims paying ability and how this relates to Senior Life Settlements provide more options for your clients, call West Coast Settlements at (657) 254-4300 or send an email to firstname.lastname@example.org.