Friday, August 28, 2009

Long-Term Care Insurance Can Keep Your Income Plan On Course

For many a carefully developed income plan is like a car that receives regular tune ups in the hopes that you’ll have a smooth ride into retirement. But a serious illness can force your income vehicle up on the shoulder of a road and reinforce the benefits of long-term care policies, according to fee-only certified financial planners.

The first assumption to look at is whether you and your income plan need long term care insurance. The overwhelming answer from all interviewed was that unless you have significant wealth or have a low income, you do.

In fact, several planners drew on experiences in their own family to explain the value they place on long-term care insurance. Doug Kinsey, of Artifex Financial Group, Dayton, Ohio speaks of his father, an insurance broker who bought coverage but not enough. When his father had a stroke, a skilled care situation was need. The cost is between $8,000 and $9,000 a month, he says. At some point, patients in these situations will end up on Medicaid, he adds. “But what about the spouse?” Kinsey adds.

Curtis Smith, a planner with Interactive Capital Management, Sugar Land, Texas, says that long-term care insurance preserves net worth for the caregiver spouse so that in the future that spouse does not end up on Medicaid. Without insurance, “the caregiver is at risk,” with “children taking up the slack” or the caregiver eventually relying on Medicaid, he adds. Smith says that in the last eight years, he has seen it with both his parents and his wife’s parents. “Anyone who has cared for a parent (as a baby boomer) will tell you the same thing. Only those who have not experienced this are the hardest to convince.”

While there is general agreement about the need for long-term care protection, there are very divergent approaches to recommendations planners are making. Part of the reason is individual client circumstance and another factor is that there are just so many facets to long term care. “For this product, maybe you can’t be overinsured because there are so many unknown risks to be covered,” says Artifex’s Kinsey.

“Long term care insurance policies are among the most complicated insurance policies there are. They have many moving parts including the amount of coverage, co payments, inflation protection, elimination periods, and coverage for a variety of levels of care like home care, assisted living, and nursing home care,” according to Frank Boucher, a planner with Boucher Financial Planning Services, Reston, Va. And, he says, “beware of ‘cheap’ policies because they may exclude coverage on items that are important to you.”

Roger Wohlner, a planner with Asset Strategy Consultants, Arlington Heights, Ill., maintains that it is important to take a look at how much you can afford. “You can be insurance rich and cash poor,” he contends. But, he also notes that in his part of the country, annual costs for a nursing home can be $75,000 or more. Wohlner says that since the general life expectancy in a nursing home is approximately 3-5 years, he often suggests ‘share care’ of 5 years for both spouses.

A ‘shared benefit’ in which one can tap into a partner’s benefits is also mentioned by Jerry Miccolis, a planner with Brinton Eaton Wealth Advisors, Madison, N.J. Miccolis says that married couples may qualify a “partners discount” on the policies’ premiums.

In fact, according to Artifex Financial’s Kinsey, even if a couple buys separate policies, the discount for each policy can be as much as 30%.

Long-term care insurance is something you buy to protect against catastrophes when care extends beyond the typical 18 months, according to Barry Korb, a planner with Lighthouse Financial Planning, Potomac, Md. Korb says that to protect against catastrophic risk, one should buy at least 10 years of coverage between a couple if they can afford it.

He questions agents who sell an inadequate amount of insurance just to make a sale rather than no sale. For instance, he said that his sister-in-law was sold coverage of $160 a day with an inflation protection of 5% simple interest rather than 5% compounded interest, which saved $1,000 annually in premium but would make a difference in $90,000 annually if the policy needed to be used. Fortunately, he was able to get the policy changed because it was in an introductory phase of the contract, called a free-look period.

That is why Jerry Verseput, a financial planner with Veripax Financial Management, El Dorado Hills, Calif., recommends avoiding anyone who has the sole purpose of selling a LTC policy. Veresput also notes that insurance is just one way to prepare for long-term care needs.

Korb notes another risk for those who can afford LTC insurance and do not purchase it: the trap of refusing to pay for needed care and dying as was the case of one woman he knew.

A common error is buying a policy with the least expensive premiums, according to Rick Shapiro, a planner with Investment & Financial Counselors, West Hartford, Conn. The reasons, he explains is the risk of a significant increase in premiums as well as the long-term viability of insurers who are charging the cheapest premiums.

For those who are concerned about cost, potential purchasers of policies should also consider that the cost of normal expenses such as the need for a car and things like golf membership will go away when a spouse goes into a facility, according to Larry West, a financial planner with West Financial Consulting, Huntsville, Ala. And, LTC is a tax deduction on Schedule A of tax forms subject to 7.5% of adjusted gross income.

West says that if LTC policies protect the spouse who does not need assistance, once that individual dies, his firm generally recommends the remaining spouse drop coverage and if needed, apply for Medicaid coverage if the second spouse’s retirement is put in question. However, if the remaining spouse can afford the coverage, it should be continued because Medicaid is usually the lowest form of care.

Planner Frank Presson of Presson Financial Associates, Tucson, Az., says that if investments can cover part of the cost of long-term care, then a policy covering the full cost will not be needed. He also says that since medical expenses are rising faster than the Consumer Price Index, he urges an inflation rider of 5% compounded annual increase.

And, inflation on care costs will be higher than average inflation, because as baby boomers enter care, there will not be enough facilities to hold them all, cautions Lauren Lindsay, a financial planner with Personal Financial Advisors, Covington, La.

This article first appeared on FiLife.com.




Wednesday, August 26, 2009

On Teddy Kennedy, Consensus And Healthcare

One of the points that the news reports of Sen. Edward Kennedy’s death keeps making was his ability to cross the aisle and reach consensus with fellow senators in the U.S. Senate.
Tributes coming in attest to that ability. Among the insurance trade groups to praise Kennedy are: America’s Health Insurance Plans and the National Association of Health Underwriters, both in Washington; and the Property Casualty Insurers Association of America, Des Plaines, Ill.

It is a point worth noting and a skill that may be an important component when the healthcare issue is debated in Congress over the coming weeks, as the National Association of Insurance Commissioners, Kansas City, Mo., rightly points out today.

The NAIC notes that “reducing costs and fixing the health care system will require collaboration and compromise among the federal government, state governments, providers and consumers alike, and it is critical to steer clear of the current, unsustainable path where health care costs devour an ever-increasing percentage of the national economy.”

The NAIC also correctly notes that “Constructive debate around health care reform is essential, but it should be rooted in the facts, with a clear understanding of the difficult policy decisions facing the nation.”

“There is no serious dispute that our present system fails to cover millions of Americans and costs all of us too much,” said Roger Sevigny, NAIC president and New Hampshire Insurance Commissioner.

But, “in order to finance health care through insurance as efficiently and as affordably as possible, everyone – the young, the old, the healthy, and the sick – has to be in the system,” said Sandy Praeger, Kansas Insurance Commissioner and Chair of the NAIC’s Health Insurance and Managed Care Committee. “The current proposals would prohibit health insurers from denying someone insurance simply because he or she has been treated for a pre-existing condition. Similarly, the proposals would prohibit insurers from using health status, gender or occupation when setting premiums.”

Other points that the NAIC makes is that the current proposals “eliminate caps on annual or lifetime benefits under a health insurance policy. For patients with high-cost conditions like hemophilia, who can exhaust these caps very quickly, this change will make certain that their policy delivers meaningful coverage. The proposals also acknowledge that getting everyone in the system will require adequate federal subsidies so that persons below designated income levels receive assistance in purchasing health insurance. Without subsidies, the cost of coverage, even with everyone in the pool, is too great to be affordable for millions of Americans.”

The NAIC notes that consensus can be attained “if the reform proposals are judged on their substance. And it notes that “there is far too much at stake to let this opportunity to improve health care slip away.”

I think Ted Kennedy would give his nod to that statement. Maybe he is.

Sunday, August 23, 2009

Can Obama’s Healthcare Reform Heal Ignorance?

The heat that is being generated over President Obama’s healthcare reform is more intense than x-rays being shot at a tumor. In a way, I’m not surprised. Healthcare goes right to the heart of two hot button issues: survival and money.

Survival can be parsed out into individual survival depending on the quality and amount of healthcare available, survival of a healthcare system, survival of health insurers and survival of the financial health of the United States.

Money can be viewed from various perspectives: what comes out of an individual’s pocket, what comes out of the government’s pocket and what comes out of the health insurers’ pockets (or their shareholders’ pockets.)

No wonder there is so much confusion and anger, fear and uncertainty. There are those who will argue that the media is fanning the flames by focusing on the loudest of the loud at “Town Hall” meetings. It is a possibility, I suppose. But it strikes me a bit as kill the messenger.

What really strikes me is how much exaggeration and distortion is going on. It not only strikes me, but angers and offends me because it is un-American. I think that is why I’ve waited to speak out. I’ve been trying to figure out and bring order to what I’ve been feeling.

It also strikes me at how little the public understands or, perhaps more to the point has made an effort to understand. One would think that with an issue this critical to so many, more people would take the time to read more on the issue. That would cut short the efforts of the distorters. Americans pride themselves on being self-reliant. This would be a great time to reinforce that principle and reach one’s own conclusions rather than being spoon fed rhetoric.

The best way to come to a reasoned decision on any issue is to read the positions of those at different ends of the spectrum, a few in the middle, ponder and then decide.

Toward that end, I’ve pulled together 10 Web sites that post very divergent views on healthcare. The list is just a bit of what is available. You can start with the White House site at www.whitehouse.gov.

In alphabetical order, here are the other nine:
www.aarp.org
www.ahip.org
www.ama-assn.org
www.healthreform.gov
www.moveon.org
www.nahu.org
www.pharma.org
www.teapartypatriots.org
www.uschamber.com

Happy summer reading.

Wednesday, August 19, 2009

Prudential Panel Assesses Impact of “Great Recession”

New York
There may be signs of an economic recovery but the more lasting impact of the “Great Recession” is how it will shape the behavior of Americans going forward, according to the assessment of a panel of experts on Aug. 18.

The discussion took place in New York during an economic mid-year outlook conducted by Prudential Financial, Newark, N.J.

Characteristics of the severe market downturn included a global nature that impacted countries worldwide, an accompanying financial crisis and the collapse of the housing market, according to Edward Keon, managing director and portfolio manager-quantitative management associates.

Keon said that “I think at some point in the future, we will find out that we were very close to a complete collapse.”

The event will shape Americans’ behavior going forward, he continued. For instance, Keon noted that “the home equity extraction game is over. Cheap home equity credit won’t be there.”

That tightening of home equity will have ripples, reducing home remodeling work which is often funded by home equity dollars and resulting in a less mobile society since people cannot readily sell their homes, Keon noted.

Keon said that consumers’ “new found frugality” will last a year or two before they once again become more comfortable with spending.

But, Quincy Krosby, chief market strategist with Prudential Annuities, advises “Don’t underestimate the U.S. consumer.” Krosby says that “as prices get slashed, you’ll see them come out and spend.” However, she says that the return to spending won’t represent 70% of GDP.

The recession could impact the economy in unexpected ways, she adds. For instance, during a recent REIT meeting, she said that for those ready for nursing home care, the question was asked, “How will you go into an old age home if you can’t sell your house?”

Crosby says that the recovery of the market is based on the stabilization of macroeconomic data and that normal “creative destruction” in which a market tears down in order to rebuild is being replaced by “ersatz creative destruction.” This will be good for equity markets because it will allow for more normal consolidation and will lower the unemployment rate but will also hinder the recovery process, she explains.

The “ersatz” process has been created by fiscal and monetary stimulus which will continue until growth returns, according to Krosby. She explains that Americans won’t stand for extremely high levels of unemployment that might occur if ‘creative destruction’ were allowed to run its course.

Robert Tipp, managing director and chief investment strategist at Prudential, said that there should be a windup in the economy in the next 6-12 months which will impact short to intermediate securities. But because of the tremendous selloff, fixed income securities are in a “sweet spot,” he continues. However, Tipp added that the issues of uncertain liquidity and volatility will likely continue.

Rick Romano, a principal and portfolio manager with PREI, a Prudential unit, says that there are signs of economic recovery. There is a .9 correlation to REIT performance and the economy and REITS are up 72%, he said. The recovery in the real estate market will be in about 18 months, he added.

Monday, August 17, 2009

Montana Agent Speaks Of Moment He Questioned President Obama’s Health Care Plan

Marc Montgomery, an insurance agent in Helena, Montana, waited 14 hours overnight to get a ticket for a Town Hall health insurance meeting last week in which President Obama fielded questions from Montana locals, trying to answer and ease their concerns.

In an interview with The Insurance Bellwether, Montgomery of Montgomery Insurance Services, says, “I was really happy to have the opportunity to address the President.”

What he is not so happy about is the Obama health plan and how insurers are being targeted as villains, he continues. “I honestly believe that if this liberal thinking is not slowed down or checked, we will not be able to sell insurance. The public plan will absolutely lead to the demise of health care as we know it today.”
“When the government subsidizes a program, how can regular programs compete?” he asks. He refers to the financial problems programs such as Social Security, Medicare and Medicaid face. Montgomery says that he believes that some plan will pass, although no one can be sure of what it will be.

So, what does Montgomery believe is the solution? First, he would remove the state regulatory system in favor of national regulation so that “the entire nation could be opened up” with options such as a national high risk pool. That pool could be funded by both government dollars and contributions from insurance companies, he says.

Montgomery says that state high risk pools are short on cash and a national high risk pool would take pressure off states. He says that he is familiar with this issue because his wife is part of Montana’s high-risk health pool. It works well, but recently members were informed that the pool is underfunded and will be in financial trouble unless Congress provides additional funds. And for states like California with bigger populations, the problem could be even bigger, he adds.
Other changes would include requiring insurers to cover preexisting conditions, although he notes that this will increase the cost of insurance. Tort reform is also needed, he adds. However, he does say that such change would just be part of the cost.

The biggest reason for health care’s skyrocketing costs is people not being able to pay their bills and many of those people are illegal aliens, Montgomery adds. Illegal aliens are paid little and can’t afford to pay, relegating their bills to the health care system, he explains. “Millions would be saved” if the system did not have to support illegal aliens, he adds.

When asked if he believes that up to two thirds of the cost for this program could come from greater efficiencies as the President said during the Belgrade, Mont. town meeting, Montgomery says that he doesn’t believe it because the “overwhelming majority of Americans are not going to put private information over the Internet.”
“My question to President Obama was ‘how did we start with health care reform and end up with health insurance reform?’”He says that he never received an answer to that question. “They are looking for someone to demonize and they went to the insurance companies.” While there may be some cases in which claims are not paid and should have been covered, Montgomery also notes that millions of Americans are getting their claims paid.

Montgomery said that the town meeting itself was cordial, possibly because Obama supporters had made a concerted effort to get many of the available tickets. However, outside the meeting there were large protests. “Yelling and screaming is wrong but these people need to be challenged on these ideas,” he asserts.

There are signs that the White House might be willing to reconsider the public option although some Congressmen say that a program without the option won’t have their vote. More will unfold in the coming weeks.

Paterson Appoints Wrynn New N.Y. Superintendent

New York Governor David A. Paterson today announced the appointments of James J. Wrynn to serve as New York State Superintendent of Insurance. Kermitt Brooks had been Acting Superintendent since the departure of Eric Dinallo in June.

Wrynn is executive director of the New York State insurance fund. He is a founding partner of MacKay, Wrynn & Brady LLP, where he has litigated cases focused on insurance issues and claims on behalf of major companies, their policyholders, municipalities, and public authorities. Prior to that, Mr. Wrynn worked from 1982 to 1992 as a trial attorney with McCormick, Dunne & Foley, specializing in civil trials and appellate practice related to professional malpractice, subrogation, property and casualty coverage disputes, liabilities and insurance. His professional career has provided considerable experience in the areas of insurance, accounting and tax issues.

Effective August 20, 2009, Mr. Wrynn will begin to serve as Superintendent-designate and assume the permanent appointment pending Senate confirmation.

As Superintendent of the Department of Insurance, Mr. Wrynn’s salary will be $127,000.

Friday, August 14, 2009

A Year After AIG, Regulators Discuss How To Close Regulatory Gaps

Nearly a year after American International Group, New York, suffered a financial blow related to Wall Street’s financial meltdown; state insurance regulators are looking at ways to close oversight gaps because different regulators had jurisdiction over different parts of a company with insurance entities. Talking points are being raised to see if broader oversight might help regulators keep insurance units financially safe.

These potential action items were discussed during a recent discussion of the National Association of Insurance Commissioners’ Group Solvency Issues working group. The group is part of the Solvency Modernization Initiative (Ex) task force. The discussion is at an initial, high level.

Among the issues that are being bandied about are whether regulators should further investigate developing group wide supervision and capital requirements for all companies in the group rather than just the insurance units.

Related to that discussion was how broad the authority of regulators should be and whether broader surveillance would help insurance regulators understand the impact on the financial condition of an insurer.

While it was generally agreed that it would be appropriate to look at how a holding company would impact an insurance unit, it was less clear how regulators could require a holding company to take a particular action because it was creating a perceived risk for that insurance unit. For instance, regulators participating in the discussion maintained that non-affiliated units should not be within the scope of the working group’s research.

And for example, it was asked by Nebraska Director Ann Frohman whether it would be a government jurisdictional issue. The discussion turned to what powers are inherent to an insurance commissioner and whether federal preemption issues may surface and it might be necessary to work with federal regulators, particularly if it dovetails systemic risk work being looked at on the federal level.
Regulators also considered that risk-based capital at the holding company level will also be retained as a discussion item but that could also involve federal preemption issues.

But Steve Broadie of the Property Casualty Insurers Association of America, Des Plaines, Ill., asked whether the end result might be a higher minimum capital requirement for insurers in a holding company rather than in a single entity. “We would have some issues [with that,]” Broadie added.

Enterprise risk management was another point of discussion with most agreeing that the exercise which involves everything from fiduciary and reporting requirement, but also noting that the working group would need to decide how to effectively use this risk management tool. Morag Fullilove, representing the Group of North American Insurance Enterprises, New York, supported the NAIC’s effort to encourage these programs.

Separately, the issue of ensuring sufficient financial cushion for an insurer also surfaced as regulators, actuaries and industry try to fill in details of the principles-based reserving project.

Donna Claire, who is spearheading an effort by the American Academy of Actuaries, Washington, to work with regulators to put principles-based reserving in place, spoke on Aug. 12 during a joint NAIC call of the Capital Adequacy “E” Task Force and the Life and Health Actuarial Task Force. Claire addressed calibration criteria following a discussion of scenario generators. Scenarios will be run by companies to test the likelihood of different events that could impact a company’s financial strength, and hence, reserves.

Claire pointed out that the calibrations would offer not only a regulatory benefit but also would help companies with business planning. Part of the broader argument for PBR is that it is not only a benefit to regulators but also important to companies as a self-assessment tool.

Wednesday, August 12, 2009

Michigan Domestics’ Dispute Of NAIC Filing Fees Continues

A dispute in Michigan over database fees for receipt, maintenance and analysis of insurance company annual statement filings, will probably not be resolved until the end of first quarter 2010, according to an order by Michigan Administrative Law Judge Renee Ozburn.

Discovery in the case is to be completed by Dec. 11 and a pre-motion hearing will be held by Jan. 15, 2010. A hearing is scheduled for Feb. 16, 17 and 18 of 2010 and interested parties have until March 1, 2010 to file amicus briefs. An initial hearing was held on July 6.

The disagreement arose when some Michigan domestics declined to pay the filing fees stating that they were told by a previous insurance commissioner that they would not have to pay them. On Dec. 15, 2008, the National Association of Insurance Commissioners, Kansas City, Mo., filed a petition seeking an order from Ken Ross, the current commissioner of the Michigan Office of Financial and Insurance Regulation, authorizing domestics to pay those fees. Under state law, an insurer cannot be compelled to pay any NAIC unless the commissioner orders the company to do so.

Ross has not issued an order on this issue at this time, according to Jason Moon, a department spokesperson. Companies still must file the annual statements but have not agreed to pay the fees. They have not paid any fines, he adds.

The following insurance groups are disputing the fees, according to an exhibit to an NAIC petition:
--the combined operations of: Amerisure Co., Auto Club Ins. Association, Auto Owners Ins. Co & Affiliates, Farm Bureau of Michigan Group and Frankenmuth Mutual Ins. Group.In total, 26 companies are questioning the payments.

In its petition the NAIC points out that it is often called upon to use information from filings to provide services to state insurance departments and state legislators. It estimates that filing fees in 2008 totaled $25.1 million while total expenses for solvency regulatory support was $35.9 million during the same timeframe.

Sunday, August 9, 2009

Rating Agencies Offer Industry Snapshot

Several interesting reports issued within the past week by rating agencies offer a snapshot of how the industry is faring in the current economic environment.

A recent report from Moody’s Investors Service, New York, asks the question a lot of us are asking: “Are Insurers and Investment Managers on the Road to Recovery?”
There is both good and bad news, according to the Aug. 3 report by Moody’s. While market access has rebounded quite a bit from the fall of 2008, there are still challenges and there is no guaranty that a rebound can be sustained.

The report notes that government interventions have contributed to the stabilization of the investment markets; insurance industry capitalization is starting to improve following a rebound in the markets which have “dented” portfolios; but this improvement remains vulnerable.

Of the North American life insurance industry, Moody’s says that while things are improving of late, the industry still faces an “uphill battle” due to “volatile equity markets, heightened fixed income impairments, and potentially troubled commercial real estate investments.”

The mixed view of what insurers face is exemplified by the situation for variable annuity writers. Equity markets have improved, removing some of the pressure for VA writers but many writers are “still coping with “older blocks of mispriced or underhedged business” and insurers must still contend with the impact of low interest rates, according to Moody’s.

Another market factor that insurers will face through 2010 is exposure to asset impairments and losses from investment grade bonds and commercial mortgages, Moody’s continues.

The North American property-casualty and reinsurance markets have been the least affected by the recent economic crisis, Moody’s continued. Consequently, the report says, downgrades have been modest to date. Rather, most pressure has come from natural disasters such as hurricanes, the report adds.

However, P-C companies with diversified operations have felt the impact of a down economy to a greater degree than pure plays, according to Moody’s. Commercial line insurers, the rating agency says, have a negative outlook reflecting slightly negative pricing and thinner economic cushion in insurers’ claim reserves and “somewhat weakened” capital adequacy levels.

The rating agency also says that “Personal lines insurers have likewise faced some capital strain from catastrophe and investment-related losses, but these concerns have remained offset by their stronger risk-adjusted capitalization levels, and by more responsive pricing in personal lines.”

While the U.S. healthcare insurance sector regained some earnings traction in the first half of this year, Moody’s says, it still faces challenges such as an economic environment that will hinder membership growth and the uncertainty of federal regulatory changes.

Financial guarantors, Moody’s says, remains under “substantial stress” as losses on residential mortgages continue to increase. And, it continues, other insured sectors such as CMBS could become major loss contributors.

Separately, Standard & Poor’s Corp., New York, said that “significant operating losses have applied downward pressure on mortgage insurers’ capital adequacy ratios.” That trend is expected to continue through 2010, according to S&P. The rating agency notes that in the past 27 months six private mortgage insurers rated by S&P had “statutory net losses of $8.7 billion, wiping out $4.0 billion in 2006 and 2005 industry earnings.”

S&P says that although mortgage insurers have “significant claims-paying resources,” companies will have to “pay tremendous amounts of claims in the next few years.” Consequently, the rating agency continues, “mortgage insurers' ratings range from the high end of speculative grade to the low end of investment grade.”

Thursday, August 6, 2009

LTC, NARAB Work Progresses At NAIC

Regulators looking at changes to the Long-Term Care Insurance model regulation are trying to create a tool that would allow them to help measure claim denials with industry data without creating a costly IT hurdle, according to a discussion by an LTC subgroup of the Senior Issues “B” Task Force during a conference call this afternoon of the National Association of Insurance Commissioners, Kansas City, Mo. The intention is to begin using the changes for the 2010 reporting period after the work is presented to the Senior Issues Task Force at the September NAIC meeting in Washington next month. The work would also be shared with the NAIC’s Market Conduct Analysis working group.

There are two ways that regulators and industry say are being used to measure claim denials: per person or per transaction. According to industry representatives, roughly half of LTC companies use each method to track claims denial. But they also say that if they are made to report under both methods or the method that they are not using, there would be great cost to change systems. A discussion was made about whether there should be cross-referencing of methods or whether companies should be measured against complaint data according to the method they use.

There was agreement that both state and nationwide data which is available in the blue book financial statutory filings could be used in Appendix E because it would place it in one centralized place. And there was discussion about how there are other factors in claims denial which need to be examined including whether the denial was because the facility was not a qualified institution.

Regulators also adopted a timeline for a checklist that would measure whether states are in compliance with the National Association of Registered Agents and Brokers provision of the Gramm-Leach-Bliley Act of 1999. The provision required the NAIC to come up with standards that 26 states had to adopt to prevent federal oversight of producer licensing. To date, 47 states and jurisdictions are in compliance with those provisions. Four states, according to the conversation, are not yet in compliance: California, Florida, New York and Washington state, the four corners. However, it was noted that Florida maintains that it is largely in compliance. Regulators also discussed how every state can be encouraged to be compliant with the standards.

In 2007, the NAIC started a review to make sure that states are still in compliance. Toward that end, a reciprocity report was recently adopted and could become official NAIC policy if approved by the executive committee and full NAIC plenary. A vote on a timeline on a compliance checklist was advanced by NARAB working group of the NAIC’s Producer Licensing (EX) Task Force. The checklist would have to be completed by no later than July 2010 although earlier compliance would be encouraged.
Wes Bissett, a representative with the Independent Insurance Agents and Brokers of America, Alexandria, Va., recommended that the checklist be turned in sooner rather than later because there would be work needed after the checklist are turned in. That work will take time, he noted. In fact, after the timeline was advanced, the discussion turned to details of the checklist.

Monday, August 3, 2009

State Regulators Reiterate Their Thorough Review of AIG

State regulators continue to deliver their message that they are working hard to make sure that American International Group’s insurance units are sound and able to pay policyholder claims. In a letter to The New York Times on July 31, Acting New York Superintendent Kermitt Brooks and Pennsylvania Insurance Commissioner Joel Ario, both representing the National Association of Insurance Commissioners, reiterated the NAIC’s work on the issue.

In the letter, the two commissioners said that “State regulators are engaged in a virtually non-stop, coordinated, comprehensive review of AIG's U.S. insurance company subsidiaries, both at the level of the individual companies and within and across the entire group of companies.”

They explained that the process includes quarterly and annual financial reports and a thorough review by multiple review teams working through the NAIC, Kansas City, Mo. Ario and Brooks wrote that based on a complete review of available material, state insurance regulators are convinced that the insurance units at A.I.G. , New York, are able to pay claims.