Table Of Contentthe ISSN 0095-2923
INJURARNC
FORUM ==
Joseph M. Beith, Editor
Ann |. Belth, Business Manager
Lois J. Braunlin, Circulation Manager
.. . for the unfettered exchange of ideas about insurance
CONTENTS
Editor’s note: Volume 20 of The insurance Forum, consisting of ten monthly issues, the 32-page September/October 1993 special |
ratings issue, and this table of contents, may be purchased for $50. For ordering instructions and prices of single back issues, see
the box at the bottom of the second page of this table of contents
Vol. 20, No. 1 (January, 1993) AN OUTDATED REPORT FROM CONTINENTAL
AMERICAN LIFE
THE CONTINUING STRUGGLE TO PROTECT THE Describes how Continental American Life Insurance
RIGHTS OF POLICYOWNERS WHEN POLICIES ARE Company utilized for several months an cutdated report
TRANSFERRED FROM ONE INSURANCE COMPANY prepared by A. M. Best containing a higher rating than
TO ANOTHER that currently applicable to the company, includes the
Describes several drafts of a modei act being developed response of a company official to our inquiry about the
by the National Association of Insurance Commissioners matter, and includes the views of a Best official
(NAIC) relating to insurance policy transfers, includes the
full text of a letter to the NAIC on the subject from
A MESSAGE FOR READERS WITH VISION PROBLEMS
United States Senator Howard M. Metzenbaum, dis-
Describes a complaint from a reader with vision prob
cusses a federal court case in which the judge ruled that
lems concerning the size of the type used in The /nsur-
Security Benefit Life Insurance Company remained obli-
ance Forum, and explains how the matter was resolved
gated to the owner of a large annuity that supposedly
by granting him permission to make a single enlarged
had been transferred in 1987 to Life Assurance Com-
photocopy of each issue
pany of Pennsylvania, includes the full text of the
judge’s analysis in the case, describes a class action
lawsuit involving other annuities in the same block of RECENT DEVELOPMENTS IN THE RATINGS OF
business, and discusses a Florida state court lawsuit in- LIFE INSURANCE COMPANIES
volving annuities transferred from four insurance compa- Lists, in a follow-up to our September/October 1992
nies to Guarantee Security Life Insurance Company prior issue, the life-health insurance companies that were as-
to the seizure of that company by Florida regulators signed new ratings or whose ratings were changed be
tween August 3, 1992 and December 31, 1992
FROM THE MAILBAG
Comments by Jeffrey J. Dorman, John L. Flitz, Danny M. Vol. 20, No. 3 (March, 1993)
O’Grady, and Brian R. Lang
RISK-BASED CAPITAL, A NEW GAG RULE, AND THE
Vol. 20, No. 2 (February, 1993) COMING ASSAULT ON STATE FREEDOM-OF-
INFORMATION LAWS
JACKSON NATIONAL’S TRANSFER OF ITS Describes the risk-based capital (RBC) model act
MICHIGAN POLICYOWNERS adopted for life-health insurance companies by the Na-
Describes the transfer by Jackson National Life Insur- tional Association of Insurance Commissioners, identi-
ance Company of its Michigan policyowners to a newly fies the information that will be made public in compa-
created subsidiary, explains the relationship between nies’ financial statements beginning in the spring of
the transfer and the speciai deposit that Michigan re- 1994, and discusses the model act’s confidentiality pro-
quired of Executive Life Insurance Company, and identi- vision that prohibits insurance companies and agents
fies several unanswered questions about the transfer from disseminating RBC information
Copyright © 1993 by Insurance Forum, Inc
Contents 1993 The Insurance Forum
GREAT-WEST LIFE’S TRANSFER OF ITS to assist candidates preparing for LOMA examinations,
UNITED STATES POLICYOWNERS describes the correspondence between the two organi-
Describes the transfer of a block of United States busi- zations, discusses the subsequent lawsuit filed by Keir
ness of The Great-West Life Assurance Company (a against LOMA, and identifies the key issues and implica-
Canadian company) to a subsidiary in the United States, tions of the case
explains how the transfer differs substantially from those
discussed in our previous articles, and concludes with FROM THE MAILBAG
an expression of opinion that the procedures followed Comments by Gary Rosenberg and William P. O’Neill
by Great-West are worthy of emulation by companies
whose objective is to protect the fundamental contrac- Vol. 20, No. 5 (May, 1993)
tual rights of the owners of transferred policies
A CONTINENTAL CASUALTY COMPANY POLICYOWNER
EQUITABLE’S DECEPTIVE LETTER TO SHAREHOLDERS SAYS NO TO THE TRANSFER OF HER MEDICARE
Shows a letter sent with a dividend check in October SUPPLEMENT POLICY TO BANKERS LIFE AND
1992 to shareholders of the parent company of The Eq- CASUALTY COMPANY
uitable Life Assurance Society of the United States, ex- Describes a letter received by a Continental Casualty
presses the opinion that the letter was deceptive in the Company Medicare Supplement policyowner in Wiscon-
manner in which it referred to the financial strength rat- sin informing her that the policy was being transferred to
ings of the subsidiary, and includes a letter written by a Bankers Life and Casualty Company, shows the as-
company official in reply to my inquiry sumption certificate sent to Wisconsin policyowners, de-
scribes the correspondence between the policyowner
INVESTORS INSURANCE CORPORATION MODIFIES and Continental and the correspondence between the
A DECEPTIVE ADVERTISEMENT policyowner and the Wisconsin insurance department,
Discusses an advertisement, run in insurance trade discusses the situation of policyowners in Washington,
magazines by Investors Insurance Corporation, that Georgia, Tennessee, and other states, and concludes
mentioned the ratings of its reinsurer, describes how the with an expression of opinion that Continental appar-
advertisement was modified twice after | wrote to the ently remains obligated to all of its Medicare Supple-
company and its reinsurer about the matter, and con- ment policyowners with the possible exception of those
cludes that the version in which reinsurance was not in Georgia who did not reject the transfer
mentioned was preferable to the other versions
MORE ON LIFEUSA’S DECEPTIVE
Vol. 20, No. 4 (April, 1993) PROMOTIONAL MATERIAL
Refers to the article in our December 1992 issue about
CONTINUING EDUCATION FROM JACKSON NATIONAL the Life USA promotional material that emphasizes the fi-
Discusses the Indiana statute under which agents are nancial strength ratings of the company’s reinsurers, in-
required to obtain continuing education credits to qualify cludes the memorandum that LifeUSA’s chief executive
for renewal of their licenses, describes the initial ap- officer sent to his field force after publication of our De-
proval and subsequent disapproval by the Indiana insur- cember 1992 article, describes the results of our survey
ance department of a continuing education course of- of state insurance commissioners, and concludes that
fered by a regional office of Jackson National Life the responses from Kansas and Florida show that regu-
Insurance Company, includes the investigator’s report lators in at least those two states believe it is deceptive
that led to the disapproval of the course, and concludes for a company to emphasize the ratings of its reinsurers
that the case raises questions about the extent of other
inappropriate courses FROM THE MAILBAG
Comments by James A. Zacha, Jeff A. Schwertfeger,
A TROUBLESOME DISPUTE IN PROFESSIONAL Robert H. Harmon, Dennis G. Kuby, and Mark Z. Walters
INSURANCE EDUCATION
Discusses a copyright dispute between the Life Office Vol. 20, No. 6 (June, 1993)
Management Association (LOMA) and Jack C. Keir, Inc.
over the preparation by Keir of study materials designed JACKSON NATIONAL’S MICHIGAN TRANSFER BEGINS
TO UNRAVEL
Refers to the article in our February 1993 issue about
The Insurance Forum is published monthly by Insurance the transfer by Jackson National Life Insurance Com-
Forum, Inc., P. O. Box 245, Ellettsville, IN 47429. The sub- pany, a company domiciled in Michigan, of its Michigan
scription price is $60 per year.
policyowners to a newly created Michigan subsidiary,
Reprints of back issues are $5 each, with nine excep-
tions. The August 1993 issue and the September/October describes the efforts of a frustrated policyowner who
1993 special ratings issue are $10 each. Also, the October was unsuccessful in rejecting the transfer, describes the
1988, September 1989, April/May 1990, June 1990, efforts of two policyowners who were successful in re-
September 1990, September/October 1991, and Septem- jecting the transfer, shows a letter written by an assis-
ber/October 1992 issues are $10 each.
tant attorney general to the Michigan insurance commis-
We absorb mailing costs, but checks must accompany
orders. Indiana residents please add 5% sales tax. sioner about the transfer, discusses the correspondence
©1993 by Insurance Forum, Inc. All rights reserved. The between the commissioner and Jackson’s chief execu-
Insurance Forum may not be reproduced in whole or in part tive officer, describes the important distinction between
without permission in writing from the publisher.
“contingent” and “joint” liability, and concludes that
Copyright © 1993 by Insurance Forum, Inc
The Insurance Forum Contents 1993
Jackson should be required by the commissioner to ac- rangement entered into by Lone Star with Mercantile
knowledge the company’s continuing joint liability to the and General Reinsurance Company, mentions the
owners of the transferred policies nondisclosure to policyowners of certain financial com-
mitments of Lone Star, discusses a disturbing statement
Vol. 20, No. 7 (July, 1993) attributed to Crown Life in the actuary’s report, con-
cludes with an expression of opinion that Crown Life re-
A TALE OF TWO EQUITABLES—THE CLASH OVER mains obligated to all of its disability insurance policy-
RISK-BASED CAPITAL DATA
owners in the United States, and includes excerpts from
Refers to the article in our March 1993 issue about the the actuary’s report
risk-based capital (RBC) model act for life-health insur-
ance companies adopted by the National Association of MANUFACTURERS LIFE’S TRANSFER OF ITS
insurance Commissioners (NAIC), discusses the letter UNITED STATES POLICYOWNERS
written to the NAIC by an official of The Equitable Life Describes the transfer of a block of United States busi-
Assurance Society of the United States urging a more ness of The Manufacturers Life Insurance Company (a
stringent confidentiality provision, discusses the letter Canadian company) to a subsidiary in the United States,
written to the NAIC by an official of the Equitable Life In- indicates that the transfer is similar to that accomplished
surance Company of lowa urging the elimination of the by The Great-West Life Assurance Company as de-
confidentiality provision, reviews the filings of several scribed in our March 1993 issue, and concludes with an
companies that disclosed their RBC figures in public fil- expression of opinion that the procedures followed by
ings, describes the results of our survey of the RBC fig- Manufacturers Life are worthy of emulation by compa-
ures of large companies, and discusses the major differ- nies whose objective is to protect the fundamental con-
ences between securities regulation and insurance tractual rights of the owners of transferred policies
regulation in the area of disclosure
LIFE-HEALTH INSURANCE COMPANIES’ JUNK BONDS
FROM THE MAILBAG AND PROBLEM MORTGAGES
Comments by Elena Castor, Steve Kruman, Gerald Gor- Shows the holdings of junk bonds and problem mort-
don, and Hornsby Mims gages by 57 large companies and by 38 other compa-
nies with certain specified levels of exposure, and uses
GUARANTY INCOME LIFE’S EXTRACONTRACTUAL certain risk factors to relate the exposure of the compa-
BAIL-OUT ARRANGEMENT nies relative to their statutory net worth as adjusted to
Describes a brochure, used in the sale of flexible- include their asset valuation reserve
premium deferred annuities by Guaranty Income Life In-
surance Company, that referred to an interest rate bail- EXECUTIVES’ COMPENSATION IN 1992
out arrangement offered by the company, explains that Shows the 1992 compensation of persons who received
the company’s annuity contract contained no such pro- $500,000 or more in various insurance companies
vision, discusses the welcoming letter sent by the com-
STATEMENT OF JOSEPH M. BELTH TO THE NAIC ON
pany to buyers of the annuities, describes the letter sent
INSURANCE POLICY TRANSFERS
to annuitants that informed them of an interest rate re-
Presents a statement | submitted to the National Associ-
duction without telling them the bail-out provision was
ation of Insurance Commissioners on May 28, 1993 on
triggered, identifies several public policy questions
the subject of insurance policy transfers, discusses the
raised by the arrangement, and reports on the com-
three implied consent provisions in the current draft of
pany’s lack of response to several related questions the model act on policy transfers, discusses three other
needed changes in the draft, and expresses the opinion
Vol. 20, No. 8 (August, 1993)
that adoption of the model act in its present form would
CROWN LIFE’S TRANSFER OF ITS UNITED STATES be an affront to consumers and an embarrassment for
state regulation of insurance
DISABILITY BUSINESS TO LONE STAR LIFE—
A CASE STUDY IN NONDISCLOSURE OF JACKSON NATIONAL’S MEANINGLESS VICTORY OVER
MATERIAL INFORMATION MICHIGAN OFFICIALS
Discusses the notification package sent to the owners of Refers to the articles in our February and June 1993 is-
disability insurance policies issued in the United States sues, describes the approval by the Michigan insurance
by Crown Life Insurance Company (a Canadian com- commissioner of Jackson National Life Insurance Com-
pany) concerning the transfer of their policies to Lone pany’s transfer of its Michigan business to a newly cre-
Star Life Insurance Company, describes four versions of ated subsidiary, and expresses the opinion that Jackson
the assumption certificate sent to policyowners in vari-
remains liable to the transferred policyowners because
ous states, discusses the independent actuary’s report
the company’s obligations cannot be extinguished with-
prepared in accordance with rules established by Cana- out the informed consent of those policyowners
dian regulatory authorities, mentions the availability of
the report, describes the announcements of the transfer Vol. 20, Nos. 9 and 10 (September/October, 1993)
placed by Crown Life in two newspapers, discusses the
nondisclosure to policyowners of the financial strength FINANCIAL STRENGTH RATINGS OF LIFE-HEALTH
ratings of the two companies, describes the so-called INSURANCE COMPANIES
safety features built into the arrangement, mentions the Explains, in this lead article in our 32-page special rat-
nondisclosure to policyowners of the “surplus relief” ar- ings issue, the reasons for public concern about the fi-
Copyright © 1993 by Insurance Forum, Inc IX
Contents 1993 The Insurance Forum
nancial soundness of life-health insurance companies, ance companies by Weiss Research were included for
recommends individuals rely on firms that are in the the first time, and explains the reasons why the decision
business of evaluating the financial condition of insur- was made to include the Weiss ratings
ance companies, discusses the ratings assigned to life-
health insurance companies by the A. M. Best Com- FROM THE MAILBAG
pany, Standard & Poor’s Corporation, Moody’s Comments by Kenneth Taylor, Joseph M. Himmelstein,
Investors Service, Duff & Phelps Credit Rating Com- and Henry Grangaard
pany, and Weiss Research, explains how an individual
should use the ratings when trying to select a life-health Vol. 20, No. 12 (December, 1993)
insurance company from which to purchase new insur-
ance, identifies seven other important considerations POLICY TRANSFERS AND THE KANSAS INSURANCE
when an individual is trying to decide whether to replace DEPARTMENT
an existing policy, discusses the problems associated Discusses the strongly worded bulletin recently issued
with transfers of policies from one insurance company by the Kansas insurance department on the subject of
to another, lists all life-health insurance companies rated insurance policy transfers
as of August 3, 1993 by one or more of the five rating
firms and some of the companies that were not as- THE SAGA OF THE SECURITY BENEFIT ANNUITIES
signed ratings by A. M. Best, shows rating changes that Describes how a block of single-premium deferred an-
occurred during the past year, and includes the five rat- nuities was supposedly transferred by Security Benefit
ing firms’ descriptions of their rating categories Life Insurance Company (SBL) to Life Assurance Com-
pany of Pennsylvania and then to Diamond Benefits Life
A WATCH LIST OF LIFE-HEALTH INSURANCE Insurance Company, discusses the consequences of the
COMPANIES BASED ON THE NAIC’S IRIS RATIOS failures of Diamond Benefits and Life of Pennsylvania,
Describes the statistical and analytical phases of the In- describes the lobbying activities of SBL in an effort to
surance Regulatory Information System (IRIS) of the Na- obtain the financial help of state guaranty associations
tional Association of Insurance Commissioners, explains in meeting the obligations to the annuitants, mentions
how we constructed a watch list of life-health insurance the various lawsuits against SBL by the annuitants, dis-
companies with four or more IRIS ratios outside the cusses the question of the financial condition of Life of
ranges of usual values in 1993, identifies the limitations Pennsylvania at the time of the purported transfer from
of the data, discusses how to use the information, SBL, concludes with an expression of opinion that the
shows the names and the ranges of usual values for the case illustrates the inadequacies of the safety net for in-
1993 IRIS ratios applicable to life-health insurance com- surance consumers, and includes an excerpt from the
panies, and lists all the life-health insurance companies record of a Congressional hearing on the subject
with four or more IRIS ratios outside the ranges of usual
values in 1993 THE NAIC, POLICY TRANSFERS, AND THE RIGHTS OF
INSURANCE CONSUMERS
Vol. 20, No. 11 (November, 1993) Discusses my recent correspondence with the National
Association of Insurance Commissioners concerning the
HOW INSURANCE CONSUMERS WILL BE VICTIMIZED latest draft of a proposed model act on insurance policy
BY MISUSE OF RISK-BASED CAPITAL DATA transfers
Refers to the risk-based capital (RBC) model act for life-
health insurance companies recently adopted by the THE DEVASTATING AFTERMATH OF THE EXECUTIVE
National Association of Insurance Commissioners, ex- LIFE COLLAPSE
plains briefly how the model act works, mentions the Describes a structured settlement annuity with Execu-
RBC information that will be disclosed beginning with fi- tive Life Insurance Company and the plight of an annui-
nancial statements filed in March 1994, describes the tant who faces a sharp reduction in his benefits because
RBC information obtained in our two surveys of life- of Executive Life’s failure
health insurance companies, compares RBC ratios with
financial strength ratings, discusses the limitations of LIFEUSA AND THE KANSAS INSURANCE DEPARTMENT
RBC ratios, describes the ill-advised gag rule that is a Refers to articles in our December 1992 and May 1993
part of the RBC model act, and expresses the belief that issues describing Life USA Insurance Company’s promo-
some companies with high RBC ratios and either low tional material that emphasizes the financial strength rat-
ratings or no ratings will find a way to use RBC ratios in ings of the company’s reinsurers, and describes a con-
their marketing efforts, and that many insurance con- sent order on that subject, among others, recently
sumers will be victimized in the process issued by the Kansas insurance department and agreed
to by Life USA
OBSERVATIONS ON THE INCLUSION OF THE
WEISS RATINGS OUR POLICY TRANSFER PACKAGE
Refers to our September/October 1993 special ratings Mentions the availability of our package of 14 issues
issue, mentions that ratings assigned to life-health insur- containing articles about insurance policy transfers
Copyright © 1993 by Insurance Forum, inc
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