And no one’s learned anything. I wonder if that’s because no one went to prison the last time?
Several big life insurers are going to have to set aside a total of at least $4 billion because New York regulators believe they have been manipulating new rules meant to make sure they have adequate reserves to pay out claims.
The development stems from contentions by insurance companies that states’ regulations are forcing them to hold too much money in reserve. Many of them have engaged in secretive transactions to artificially bolster their balance sheets, often through shell companies in other states or countries. Regulators, who want to be sure companies have enough real liquid assets to pay all claims, have struggled to find a solution that all 50 states can agree on, and decided to test a new framework of rules.
On Friday, New York State plans to drop out of that agreement, according to a letter from Benjamin M. Lawsky, the financial services superintendent, to his fellow state insurance regulators. In the letter, which was reviewed by The New York Times, Mr. Lawsky said the test, which started in 2012, showed that the new framework did not work and was, in fact, making the “gamesmanship and abuses” in the industry even worse.
The move appears to be another attempt by Mr. Lawsky to address the much broader potential problem of the life insurance industry’s use of the secretive transactions. He has derided them as “financial alchemy” because they seem to create surplus assets out of thin air. In June, Mr. Lawsky called on other state insurance regulators to join him in blocking any more of these transactions. But other regulators said they wanted instead to keep pursuing a test of the new regulatory framework. The test covers a narrow segment of the life insurance business, but state regulators, through the National Association of Insurance Commissioners, are committed to extending the framework to all parts of the life insurance industry over the next few years.
See, back when I was a single mom with two young kids I relied on term life insurance as my back-up plan. Nobody else was making that choice in those days.
Now, anyone who buys term life insurance (or even whole life insurance) is not thinking straight. There are too many buyers. There is no way insurers will have the moolah to pay out all those claims (because, as we know, everyone dies). That’s partly why I let those policies lapse (along the the fact that my kids are adults and the payments were becoming prohibitive); I suspected there would be nothing there.
I also love the offers I receive for end-of-life insurance so my kids won’t have to pay my final expenses. Well, as the law stands now, they are not obligated to pay my debts so it’s all a scam, preying on oldsters who care about their children. And it’s usually for a meager $10,000 (at most), which means I would pay more for the policy than it’s worth. Total rip-off.
The only way justice will ever be done upon them will be at the hands of those of us who’ve suffered as a result of their greed.