Why Does the Life Insurance Industry Have a PERFECT Record?
An alternate question: Why doesn’t every industry have a PERFECT record? Because it’s nearly impossible. Look at it this way. The LSU Tigers just finished a perfect 15-win season to win the College Football National Championship. Last season, the Clemson Tigers did the same with a PERFECT 15-0 record. In fact, the Clemson Tigers won 29 straight games before falling in this year’s National Championship game. However, these are the only two teams in 147 years of college football to have gone 15-0 in a single season. How about the pros? The 1972 Miami Dolphins finished a PERFECT 17-0 season with a 1973 Super Bowl victory. However, Miami is the only NFL team to ever finish 17-0 and the league is now 100 years old!
By contrast, the American life insurance industry has been around as long as America has been in existence. In fact, the American life insurance industry started with a company created by the Presbyterian Synods in Philadelphia and New York City in 1759. That’s 17 years before our Declaration of Independence from England. The original American life insurer was called The Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers. While the name wasn’t catchy, it was long-lasting. In fact, the company still exists today after being bought out by Provident in 1994 and after that company was acquired by Nationwide in 2002. That company has a 261-year PERFECT record of paying claims! Imagine any college or pro football team winning 261 consecutive games, much less going undefeated for the next 261 years!
However, it isn’t just the widows and children of Presbyterian Ministers who have been protected for the past three centuries, it’s every one of us! Even better, we aren’t forced to do business with only one life insurance company. Hundreds of life insurance companies do business in America and every one of them maintains a PERFECT record of paying claims. How do they do it year in and year out?
There are numerous reasons that life insurance companies are able to maintain PERFECT records:
- Most life insurance companies have huge surpluses, and many have been paying claims for more than a hundred years.
- Life insurance companies are heavily audited and rated on their claims paying ability.
- Life insurance companies share risks through reinsurance.
- The McCarran Ferguson Act was passed by Congress in 1945 to return insurance regulation to the states. Individual state insurance commissions have the ability to take over life insurance companies and state guaranty funds and associations have been established to pay claims. These state associations work through The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA). Each state also sets reserve requirements for life insurance companies.
For an example of how these protections and safeguards work, let’s consider the largest financial crisis to hit America this century. From the 2008 mortgage meltdown to today’s date, there have been 20 insurance company failures. In every case, the life insurance industry maintained its PERFECT record of paying claims through the protections noted above. Not a single policy owner or beneficiary lost a dime. By contrast, during that same time America experienced 529 bank failures and the banking industry failed to maintain a PERFECT record. Look for more on that in my next News and Views article.
In the meantime, for more information on the life insurance industry’s PERFECT record and how Senior Life Settlements provide more options for your clients, call West Coast Settlements at (657) 254-4300 or send an email to email@example.com.