Thinking about investing in Inusurance Products

Monday, April 20, 2009

Thought for the Day:
Life isn't meant to be easy. It's hard to take being on the top or on the bottom. I guess I'm something of a fatalist. You have to have a sense of history, I think, to survive some of these things.... Life is one crisis after another. - Richard M. Nixon


Thought for the Week:

There are three major items you can use to help you feel comfortable about committing some of your clients' funds to an insurance carrier's product.


1. Most Significant is the Risk Based Capital (RBC) Ratio.

* All Legal Reserve Life Insurance companies must retain a certain level of Capital Reserves to back the promises they make on the products they have sold and the products they are selling. Of course, the higher the RBC Ratio the better; 200% being the level that the National Association of Insurance Commissioners (NAIC) considers adequate. This is usually mentioned in announcements made by the company relative to responses to "news" and of course as a part of the annual financial reports. It can usually be found on the company's web site.

2. Financial Strength Rating

* A.M. BEST, Moody's, Fitch and Standard & Poor's offer the most utilized Financial Strength ratings in the industry. They are designed to provide investors and policyholders with a relative indication of the carriers' strength and claims paying ability.

3. Previous Product Pricing

* This is an indicator to follow when evaluating a company for inclusion in our portfolio of offerings. Overly aggressive pricing relative to the industry can indicate a company that is setting itself up for problems in the future. You should choose to stay away from those carriers.

Another factor to consider might be the State Insurance Guarantee Association in your state. While each state has their own levels of protection for the consumer, they generally will protect 80% of cash values up to $100,000 and 80% of death benefits up to $250,000. Go to www.nolhga.com to find the benefits available in your state.

With regards to Lincoln specifically, their current debt payments will all be met out of current cash. The real problems with them and other similar carriers revolve around the block of variable products where the substantial depletion of values has put stress on their internal guarantees such as the Guaranteed Income Riders. The industry is currently working with the state insurance departments to address this issue. The rating agencies are all giving Lincoln high marks for their ability to manage these risks.

Click Here to read a recent letter from the President of Lincoln Financial Group. It may be helpful for you in getting a better understanding of their situation and what they are doing about it.