Questions, answers for worried AIG policyholders
DES MOINES, Iowa — The financial problems at American International Group Inc. may be causing you great concern today if you hold an AIG life, health, home or auto insurance policy, or have an annuity with the company.
Insurance industry officials and analysts say there’s little for policyholders to worry about today, but they say they’re watching the situation carefully.
They’re keeping a close eye, because the potential impact in the United States for insurance policy holders is significant. The Insurance Information Institute says AIG ranks in the top 10 of insurance companies in fixed annuities sold through banks. Fixed annuities guarantee the principal and fixed payments to the buyer for a specified period of time, usually until death. AIG also ranks among the top writers of auto insurance, commercial insurance and life insurance. It led the nation in fixed annuities sold through banks, writing more than $5 billion in 2007. AIG also led in commercial insurance writing $24 billion in policies in 2007.
Here are the answers to some key questions about where AIG’s insurance businesses stand and how it may effect you.
Q: What is going to happen to the insurance businesses owned by AIG?
A: The infusion of $85 billion into AIG offers financial stability so the company will have time to decide which assets or business segments it should sell and to whom. It hasn’t been disclosed whether the insurance segment, or portions of it, would be sold.
“We believe the insurance subsidiary to be financially sound and continues to be sound today,” said analyst Joyce Sharaf of A.M. Best Co., one of the nation’s main insurance ratings companies. She said Wednesday that AIG holds major insurance businesses that “are enviable franchises that could be sold in whole or in part.”
A.M. Best analyst Marc Steinberg said he’s continuing to review AIG’s ratings and analysts are closely monitoring the situation as it unfolds. Analysts believe, however, that insurance policyholders are safe for now, he said.
Insurance regulators in New York, which have regulatory oversight over New York-based AIG, and the National Association of Insurance Commissioners said the company’s insurance operations remain solvent and can pay claims.
Insurance companies in the United States are closely regulated by government agencies established by the states in which they are based.
The company released a statement Tuesday evening which said: “Policyholders of AIG companies around the world can rest assured that AIG’s commitments will continue to be honored.”
Q: Should I be worried if I have health or life insurance policies with AIG and what if I have a retirement annuity?
You should first keep in mind that AIG continues to operate, it has not filed for bankruptcy protection and has not been declared insolvent. Even if the insurance portion of the business was for some reason declared insolvent, there are protections in place similar to the FDIC insurance that backs up your bank deposits.
Life and health insurance, and products like annuities are covered by insurance guarantee associations that have been established in every state, said Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations. The associations step in when insurance regulators in your state declare an insurance company insolvent and it’s placed in receivership.
The level of coverage may vary by state, but every state association provides withdrawal and cash value coverage for annuities of at least $100,000. About a dozen states offer up to $300,000 and a few others offer up to $500,000.
Life insurance policies are backed up with at least $300,000 in life insurance death benefits and $100,000 in cash surrender or withdrawal value. States offer at least $100,000 in health insurance policy benefits.
In the past 25 years more than $20 billion in coverage benefits have been provided by the state associations for policyholders and annuity clients of dissolved insurance companies. In that time, the associations have provided protection for more than two million policyholders and worked on more than 60 multistate insolvencies.
Q: What should I do if I hold a homeowner’s or car insurance policy with AIG?
Every state, the District of Columbia, Puerto Rico and the Virgin Islands have established property guarantee funds similar to those established to protect against losses in life and health insurance.
Guaranty funds generally pay the amount of coverage stipulated by the policy or $300,000, whichever is less. Each state has a law that places a cap on the coverage and some have higher amounts. New York, for example, has a property/casualty cap of $1 million.
Most state guarantee funds pay all of their state’s workers’ compensation benefits.
Since the late 1960s, the property/casualty guaranty system has paid out about $21 billion in claims on behalf of insolvent insurers. About $10 billion disbursed in the last six years, largely because of the frequent and severe hurricanes that have struck the Gulf Coast.
Since 1976, there have been about 600 insolvencies of property and casualty insurers. There are 2,648 property casualty insurers licensed to do business in the United States.
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Comments
This article has 13 comment(s)
Posted by moonpie on September 21, 2008 at 8:42 a.m. (Suggest removal)
Wow proletariat , education it's a wonderful thing. So when you people think your voting for "change" see what your getting? When Obama says he'll reform Washington lobbist, who's he gonna start with Freddie, Fannie, AIG ???
Posted by moonpie on September 21, 2008 at 9:01 a.m. (Suggest removal)
Well it didn't take long for the race card to be played. People just can't understand why OBAMA and McCAIN are virtually neck in neck in the polls.
"The pollsters set out to determine why Obama is locked in a close race with McCain even as the political landscape seems to favor Democrats. President Bush's unpopularity, the Iraq war and a national sense of economic hard times cut against GOP candidates, as does that fact that Democratic voters outnumber Republicans"
HOW ABOUT ITS BECAUSE PEOPLE ARE TAKING A HARD LOOK AT HIS POLICIES AND PROMISES NOW? HOW ABOUT PEOPLE LOOKED AT HIS NUMBER OF "PRESENT" VOTES BECAUSE HE DIDN'T WANT TO BE ON RECORD FOR ANYTHING? SHOWS HE HAS NO SACK! HOW ABOUT PEOPLE ARE TAKING A GOOD LOOK AT HIS RUNNING MATE AND HIS 25 YR LIBERAL RECORD? How about this, the quote mentioned was talking about democrats only"!
Posted by mkris on September 21, 2008 at 11:57 a.m. (Suggest removal)
How many lies can the republican propaganda machine spew:
1. Clinton administration is the cause: nope. It was the George H. Bush and Phil Graham. Deregulation was already on the legislative adgenda when Clinton was elected. He signed it only after it became clear that the Republican Congress would over-roide a veto and threatened to stall the the administrations legislative adgenda unless it was signed.
2. Deregulation of the pension funds was Reagan. it was deregulated in order for large corporations to divest themselves of the responsibility to properly invest employees pensions. It alos allowed corproations to stip the pensions of cash by purchasing worthless annuities and changing the terms of employmnet to 401K and 403B and thereby shifting the risk to the employees least able to make sophisticated investments hedges.
3. Lack of the enforcement of Securites and exhchange acts was a direct result of Ronald Regan, George H. Bush and George "the chimp" Bush. Each of the administrations, exclusive of Clinton slashed funding for enforcment and demanded that funding be derived from the SROs (self-regulatory organizations)
SO REPUBLICANS - THIS MESS IS YOURS> BUT YOU ALL ARE GREAT AT GOEBLES-LIKE PROPAGANDA - Keep repeating a lie long enough and the press will take it as dogmatic truth.
Posted by yteach on September 21, 2008 at 11:58 a.m. (Suggest removal)
proletariat:
Your posts illustrate the vitriol constantly spouted by the neocon sheep who obediently don their blinders each day, hold their noses, and spout partisan B.S. I have no doubt Democrats are partly to blame for the housing debacle, but how could you forget Neil Bush, John McCain and the Keating Five who started this nonsense in the 80s with the savings and loan debacle? Remember McCain and his financial advisor Phil Gramm and their insistence on deregulation of the financial markets? How about McCain's other advisor, Carly Fiorina and countless other CEOs who ran their companies aground and received huge payouts, in Fiorina's case $42M? Quit cherry-picking the facts and own up to your party's prominent role in this mess!
Posted by yteach on September 21, 2008 at 12:17 p.m. (Suggest removal)
Privitization , the Repugs answer to everything! For years, they have been hell-bent on privatizing social security so they could get their grubby hands on all that money. Think about it. What if they had been able to "invest" our social security for us? Thank you Al Gore and Bill Clinton for protecting what little remains of our financial future.
Posted by mkris on September 21, 2008 at 4:28 p.m. (Suggest removal)
proletariat-personal experience, I worked with Compliance and Law departments all the time.
Posted by mkris on September 21, 2008 at 4:47 p.m. (Suggest removal)
proletariat - I had to read the stuff, and the legislative history. So.... I don't need to read some journalist's take on what happend. Reagan and his administration started the ball rolling, with the S&L changes, insurance deregulation, and Pension "reform". The SEC has been a toothless wonder since Reagan proclaimed "government is the problem." NYS attorney general enforced mmore under its Martin Act.
Posted by guidedbystewart on September 21, 2008 at 5:44 p.m. (Suggest removal)
proletariat, you were Evil_Genuis, do not be a hypocrit....
Posted by guidedbystewart on September 21, 2008 at 5:51 p.m. (Suggest removal)
All I have to say is that our economy is in a mess and it is not because of the democrats and government regulation....My opinion and guess what, I did not get from a political (propoganda) website!
Posted by guidedbystewart on September 21, 2008 at 6:32 p.m. (Suggest removal)
fair enough, at least it's your opinion.
Posted by moonpie on September 21, 2008 at 7:03 p.m. (Suggest removal)
S_B smoke another one dude or dudette whichever u r.
uneductaed and ignorant is EXACTLY what your post sounds like. People argue the FACTS not your heart. While I vote mostly Repub our gov (both parties) are so far off the beaten path of what our governement is supposed to be it ain't funny. Where do we go from here? I heard this morning on one of the political round tables that probably the other good thing about a 700 BILLION bailout is there will be no more money for OBAMA and his policies if and when he gets in office! AMEN!
Posted by moonpie on September 21, 2008 at 7:07 p.m. (Suggest removal)
I also love to hear how democrats state that the Bush tax cuts are costing the gov money. You morons do realize thats your money don't you? Well if you work. DTMB welfare checks don't count as a freaking job! The gov has no way to raise money EXCEPT by taxing the crap out of you. They're not in the revenue earning business. So all this bail out money, is your money, jus so you know.
Posted by danedwards on September 22, 2008 at 3:30 p.m. (Suggest removal)
There is no need to panic. The insurance units are AIG are very well funded and profitable. They will survive.
But if you're going to panic about your life policy, then you should at least shop around and find the best term life insurance rates. Try this site:
http://www.reliaquote.com
But who's to know what is on the balance sheet of these insurance companies.