Facebook Slider


Optional Member Code
Get News Alerts!
Thursday, 13 June 2013 08:06

Your Life Insurance May Be Worth Nothing if You Die

  • font size decrease font size decrease font size increase font size increase font size
  • Print
  • Email


death6 1It turns out that your life insurance policy may be worth nothing if you die. 

That's the grim possibility raised in a June 11 New York Times (NYT) article by financial journalist Mary Williams Walsh:

New York State regulators are calling for a nationwide moratorium on transactions that life insurers are using to alter their books by billions of dollars, saying that the deals put policyholders at risk and could lead to another taxpayer bailout.

Insurers’ use of the secretive transactions has become widespread, nearly doubling over the last five years. The deals now affect life insurance policies worth trillions of dollars, according to an analysis done for The New York Times by SNL Financial, a research and data firm.Graphic: Insurance Captivity

These complex private deals allow the companies to describe themselves as richer and stronger than they otherwise could in their communications with regulators, stockholders, the ratings agencies and customers, who often rely on ratings to buy insurance.

So what's the bottom line on some life insurance companies -- mostly the for-profits and not mutual insurance companies owned by policy holders -- who use trillions of dollars in "re-insurance" to inflate the value of their firms?

Ah, it's the same old story of greed that we've seen over and over again on Wall Street.  According to the NYT, Benjamin M. Lawsky, New York’s superintendent of financial services, "said that because the transactions made companies look richer than they otherwise would, some were diverting reserves to other uses, like executive compensation or stockholder dividends."

To put it bluntly: the peace of mind you are sold by your life insurance at agent is at risk because if the publicly-traded life insurance companies lose their gamble on shell companies issuing "re-insurance" without sufficient collateral, there's going to be no money left to pay off your policy upon your death.

“If we let our guard down and ignore this regulatory race to the bottom, taxpayers and insurance policyholders are the ones who could get left holding the bag,” Mr. Lawsky said in a report, the NYT reports.

We're not even safe in our graves from the cancerous larceny of big finance avarice.

(Photo: Sam Howzit)