by John Darer® CLU ChFC MSSC RSP CLTC
The New York Insurance Department now known as the New York Department of Financial Services, issued a press release dated September 22, 2008 in response to reports of solicitation abuse visited upon AIG policyholders and consumers in the wake of the recent news. Some of the key points made by then insurance superintendent Eric Dinallo:
- " AIG insurance companies are financially sound, with substantially more in assets than they need to pay all valid present and projected claims"
“Don’t worry and don’t make any rash decisions if you have a policy issued by an AIG insurance company,” Dinallo said. “All your covered claims will be paid and all your annuity checks will come. Making sure insurance companies are solvent and able to pay every valid claim is my number one job, and the AIG insurance companies are strong and solvent"
- “If you have a life insurance or annuity policy and someone tells you to replace it because of the troubles at AIG’s parent company, call the Insurance Department immediately at 1-800-339-1759,” Dinallo said. “Replacing or liquidating a life insurance policy or an annuity can have heavy hidden costs and tax consequences. That is why our Insurance Law requires that you get all the information you need to make an educated decision in your best interests. There may be a cancellation penalty if you cancel your automobile or homeowners policy. If someone tells you to replace any policy because an AIG insurance company is in trouble and may not be able to pay your claim, that is not only untrue, it is against the law. Call us. Some regulators have received reports that this is happening. We will not allow it to happen in New York. We will protect consumers from improper sales practices.”
- "Why are the (AIG) insurers in a much better position than the financially challenged parent? State insurance regulators have numerous actions they can take to prevent an insurer from failing. Rating downgrades and drops in share price do not change an insurer’s ability to pay claims. From conservative accounting rules and mandatory annual CPA audits to investment regulations/limitations and minimum capital/surplus requirements, a state insurance regulator’s “toolbox” allows insurers to handle greater losses than other parts of the financial sector in down-market cycles. Additional regulatory tools include performing regular, periodic financial analysis of insurers, and on-site examinations".
The press release includes much more information that is not only useful for New York consumers with AIG policies, but is informative for AIG consumers in other states.
Dinallo also announced he would issue notices to insurance companies, agents and brokers, reminding them of their responsibilities under New York Insurance Law to fully inform consumers of the possible costs of switching life insurance, annuity and other policies.
Kudos to New York superintendent of insurance Eric Dinallo for his leadership on the issue. Unfortunately the New York state law is missing stiff regulation of factoring industry solicitation practices. Even after September 16, 2008, structured settlement cash now companies have been using the AIG story to induce panic and get annuitants to sell their annuity policies, or in the case of structured settlement annuitants, the rights to receive structured settlement payments.