In these uncertain times, the question of solvency becomes relevant. Though it is rare for a life insurance company to fail, it does happen. Here’s the main thing to know (from the NOLHGA web site):

State life and health insurance guaranty associations provide a safety net for their state’s policyholders, ensuring that they continue to receive coverage even if their insurer is declared insolvent. Working together through NOLHGA, the guaranty associations form a national safety net, protecting insurance consumers all across America in their time of need. www.nolhga.com

While laws governing maximum limits and types of policies covered vary from state to state, most states set basic limits of:

• $300,000 in life insurance death benefits

• $100,000 in cash surrender or withdrawal value for life insurance

• $100,000 in withdrawal and cash values for annuities

• $100,000 in health insurance policy benefits

The overall benefit “cap” in most states for an individual life is $300,000, though some states have maximums that are higher. Consult your State’s Association web site for exact details. Link to State Web Sites (click here) on.the NOLHGA site.
Links to each State Association can be found on the NOLHGA web site. As of 7/23/2008

Profits of the nation's life and health insurers plummeted $9.9 billion to a mere $542.6 million in the
first quarter of 2008, a 95% decline from $10.4 billion in the same period a year ago.

Profits -- made up of operating income from the business of writing insurance and realized
gains/losses on investments -- were down for the first time since first-quarter 2005 and were the
worst first-quarter industry results in the 15 years that TheStreet.com Ratings (and its predecessor
Weiss Ratings) has followed the industry.

The industry suffered a decline in its operating results as well as a massive realized loss on
investments. Operating income for the industry declined 28% to $11.9 billion in the first quarter of
2008, down $4.6 billion from $16.5 billion in 2007, while investment results turned negative in a big
way.

Realized losses on investments totaled $5.3 billion, down from a positive $1.1 billion gain during the
first quarter of 2007, primarily due to a writedown of the bond portfolio.
Information provided by www.thestreet.com

In a Reuters Story today, life certainly proved at least as strange as Fiction. Two women in their 70s, dubbed the "Black Widows" of Los Angeles, were sentenced to life in prison without parole on Tuesday for befriending two homeless men and murdering them in hit-and-run-crashes in order to collect $2.8 million in life insurance.

Prosecutors said the women had befriended two homeless men at an Eastern European church, helped them find somewhere to live, took out life insurance policies on them, and then arranged to have them killed in hit-and-run car accidents in dark alleys.

The men, Paul Vados, 73, and Kenneth McDavid, 50, were run over by cars in different Los Angeles area alleys in 1999 and 2005 respectively.

Prosecutors said greed was the motive. The two women collectively received $2.8 million from life insurance and accidental death policies they had taken out on the two men by transferring their signatures onto rubber stamps to use on the forms.

Golay claimed to insurance companies that she was the fiancee of both victims, while Rutterschmidt claimed to be a cousin.

The women were arrested in May 2006 on suspicion of fraudulently collecting insurance payments. Investigators said the women might be responsible for more deaths, saying six other life insurance policies were not paid out because of suspicious circumstances.

(Reporting by Jill Serjeant; Editing by Eric Walsh) © Thomson Reuters 2008 All rights reserved

The U.S. House of Representatives Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises has approved as amended unanimously and fast-tracked to go to the floor of the House of Representatives for consideration without action by the Financial Services Committee the following bill:

H.R. 5840: the Insurance Information Act of 2008 would create a federal office of insurance information and establish, for the first-time, a repository for the collection and dissemination of information at the federal level within the U.S. Department of the Treasury. Additionally, the bill has clearly defined and strictly limited preemptive powers applicable only if state laws conflict with United States international trade agreements.

Work is still underway in Washington for a federal insurance regulator to replace or supplement the current state regulatory system. This would be a boon to all involved in insurance (and may actually reduce expenses). This would allow products to be filed once for all states (rather than each state separately) and a license valid for all states rather than state by state.

In the latest issue of Best’s Review (July 2008), A.M Best listed 14 Life & Health Insurance Companies that have maintained a Best’s Financial Strength Rating of A or higher for at least 75 years. The rating methodology has changed over the years. Some of the companies have changed names, merged, etc. over the years.

The companies are: Aviva Life & Annuity, Beneficial Life, Country Life, Genworth Life and Annuity, John Hancock, Metropolitan Life, Nationwide Life, New York Life, Northwestern Life, Penn Mutual Life, Principal Life, Prudential Life, Standard Ins., Union Security and Western & Southern Life.

A.M. Best Company has been issuing financial strength ratings (opinions on the ability of individual insurance companies to pay claims on the coverage they have underwritten. More information can be found on their website at: www.ambest.com

A useful resource in choosing a life insurance company is the Lawsuit Library found at http://www.insure.com/articles/lawsuitlibrary/index.html . This covers recent insurance lawsuits, court orders, fines, penalties, and insolvencies.

Fitch Ratings service has announced that they have updated the Quantitative Insurer Financial Strength (Q-IFS) ratings assigned to life insurance companies in the U.S., resulting in 203 rating affirmations, 24 rating upgrades, and 15 rating downgrades. Fitch has also assigned initial Q-IFS ratings to an additional 12 U.S. life insurance companies. The update is based on statutory financial information through yearend 2007, and reflected generally modest improvement in balance sheet fundamentals and relatively stable earnings performance despite increased investment losses.

'The deterioration in the credit markets in the second half of 2007 created challenges for U.S. Life Insurers. Nevertheless, the industry continues to generate consistent earnings, driving capital growth and supporting ratings levels. Life insurer ratings have been relatively stable in the past few years as seen in the high percentage of rating affirmations, and rating upgrades that outpaced rating downgrades this year,' said Douglas Meyer, Managing Director & U.S. Life Insurance Sector Head for Fitch Ratings.

For further information on Fitch's Q-IFS ratings, Fitch has published a special report titled 'Quantitative Insurer Financial Strength Ratings Methodology: U.S. Life Insurers', which is available on the Fitch web site www.fitchratings.com and can be found in the Criteria Reports section on the Sector marked 'Insurance' under 'Financial Institutions'. The report provides an overview of the Q-IFS rating program and the rating model, a discussion of the limitations regarding the use of the Q-IFS ratings, and a review of the rating scale and definitions. SOURCE: Fitch Ratings NEW YORK, Jun 27, 2008 (BUSINESS WIRE).

For oth

Since 1996, Deloitte specialists have published the Life Insurance Operations Benchmarking Study (LIONS), which provides comparative analysis widely used by top insurance executives to benchmark expenses for operations and information technology. This year highlights from the latest LIONS have been released in the form of an executive summary report. Key findings include:

Insurers have not fully leveraged eService and call center capabilities. Lower-cost companies have unit costs that are 33 percent lower than the average; they are attaining these benefits through the use of Web and interactive voice response (IVR) technologies.Business process outsourcing is still gaining traction with insurers.
Lowest-cost insurers have unit costs that are 20 percent lower than the average. Low-cost companies realize savings of about $30 million per $1 billion of total annual premium.

View the executive summary report at: http://www.deloitte.com/dtt/cda/doc/content/us_fsi_LifeInBenchmarking_May2008.pdf

Ohio became this week, one of the first states to put into action a law in an effort to root out stranger-originated life insurance. The new amendments to Ohio insurance law “recognize a shared responsibility of the life settlement industry, life insurance companies and the [insurance] department to protect consumers against STOLI transactions,” says Mary Jo Hudson, director of the Ohio Department of Insurance.

The bill, H.B. 404, officially amends the state Viatical Settlement Act. Under the new law, the department will have more authority over life settlements, and life settlement brokers and providers are required to give insurers more information before engaging in a life settlement.

Life insurers will have to ask specific questions aimed at uncovering STOLI schemes and report suspected schemes to the department.
The Ohio law also limits the ability of consumers who use certain types of premium financing arrangements to sell life insurance policies within 5 years of buying the policies.

A policyholder can sell a life policy during the 5-year restricted period if the policyholder has experienced a life-changing event such as illness, unemployment, or the death of an intended beneficiary.

The CDC (Center for Disease Control) has released their data report for life expectancy for those born in 2005. The average life expectancy at birth was 77.8 years, the same as in 2004. Life expectancy for females remains longer at 80.4 years as compared to 75.2 years for males. Oh well.

Recent studies show that 15.9% of all whole life policies remain in force for just one year (first year lapse ratio). In years three through five, another 5.7% of policyowners will lapse their coverage. Universal Life which usually has lower premiums, loses 8.1% of policyowners in the first year and another 9.5% in the second year. After 6 years about 40% of all whole & universal life insurance policies have lapsed. The worst part is that in these early years, the surrender charge is 100% or close to it - so no cash value. (Figures courtesy of Moody’s Review- Errold Moody).

The National Association of Insurance Commissioners (NAIC) today expanded its award-winning Insure U consumer education program with new topic areas aimed at consumers in four life situations: domestic partners; single parents; grandparents raising grandchildren; and members of the military.

"Expanding our Insure U program directly reflects the varied life situations and needs that characterize our diverse nation," said NAIC President and Kansas Insurance Commissioner Sandy Praeger. "Insure U is an important resource to help consumers better understand insurance issues specific to their experiences. I'm proud that we have four new ways for Americans to get smart about insurance."

The Insure U curriculum, available at www.insureUonline.org, provides insurance tips and special considerations on four basic types of insurance: auto, home, health and life. The expanded topics build on the four life situations already available on the site: young singles, young families, established families and seniors.
NAIC (www.naic.org); San Francisco, Ca; June 2, 2008

The National Association of Insurance Commissioners (NAIC) has adopted new guidelines to protect insurance consumers from discriminatory underwriting practices in the sale of life insurance. “Americans should not be denied life insurance simply because of where they might travel,” said NAIC President and Kansas Insurance Commissioner Sandy Praeger. “These new guidelines ensure that insurance consumers are treated in a fair and non-discriminatory manner.”

The changes to the NAIC Unfair Trade Practices Model Act limit an insurer’s ability to refuse life insurance because of lawful past travel or, under specific circumstances, lawful future travel. Specifically, future travel cannot be the basis for a coverage decision unless travel to a specific destination at a specific time is found, based on sound actuarial principals and actual or anticipated experience, to create a risk of loss greater than that for individuals who do now travel to that place at that time.

Travel to a destination where the U.S. Centers for Disease Control and Prevention has issued an alert or warning or where there is an ongoing armed conflict involving a foreign army is deemed a valid basis for refusing to offer or limiting coverage. NAIC; San Francisco, CA; June 2, 2008

Article on “How Much Life Insurance Do You Need” written and added to www.nolo.com (opens new window). Features a slightly different perspective than the section on this web site on Life Insurance Planning Methods in the Resources section. This article is not credited.

In a move that is being followed by other State Insurance Departments and many consumer groups:
Insurance brokers or agents in New York State who use titles that mislead seniors will face penalties, Insurance Superintendent Eric Dinallo said today. Dinallo also warned seniors about abusive sales and marketing practices aimed at them by some insurance agents and brokers.

Possibly misleading titles such as “retirement planner,” “senior advisor,” “certified,” “senior consultant” and others are increasingly used in marketing life insurance and annuity products to seniors, often at “free lunch” investment seminars, where seniors are sometimes exposed to high pressure sales tactics, Dinallo noted.

“Seniors who have worked hard all their lives to create a nest egg should be able to trust the people who handle their money,” Dinallo said. “Seniors should not be misled into thinking a title like ‘retirement planner’ represents special expertise when in fact no such expertise exists. Agents and brokers who have worked hard to earn titles like Chartered Financial Consultant or Certified Life Underwriter that legitimately represent special education and expertise get shortchanged as well. This is misleading and cannot be tolerated.”

The New York State Insurance Department, which recently created a Senior Protection Unit focused on protecting seniors, is taking a number of steps to protect seniors against deleterious sales tactics.

See related news release: Seniors Beware - Question Credentials Of "Senior Specialists" Beware Of "Free Lunch" Seminars. New York State Insurance Department Press Release - 5/21/08

Thinly capitalized life/health companies, or those whose portfolios are heavily weighted to structured investment products or commercial mortgage-related investments, are likely to be more prone to impairment this year, according to new A.M. best research, “U.S. Life/Health - 1976-2007 Impairment Review.” A deteriorating economy and turbulent financial markets are expected to steer the 2008 life/health impairment rate higher than the 2007 rate of 0.39%, which included six financial impairments. The leading causes of impairment -- inadequate pricing, affiliate problems, rapid growth and investment problems—accounted for 75% of impairments, according to the special report, featured in BestWeek U.S./Canada. A.M. Best, Oldwick, N.J.; May 23, 2008 — visit www.ambest.com for more information.

According to A.M. Best's 2008 statistical study (U.S. Life - 2007 Financial Results) - total admitted assets for the U.S. Life Insurance Industry reached $5 trillion at the end of 2007 increasing by 5.7%.

According to a recent study by ING: Americans in every demographic group are more concerned about their death (or the death of a spouse) is a greater threat to their financial security than a recession or the possibility of Social Security going broke and view this as a much greater threat to their family’s financial situation, according to a survey from ING.

The survey found that as usual, most people do not do as they say - nearly a quarter of the 86% of people who thought they should have life insurance, do not have it.

The thought of discussing Life Insurance continues to be less popular than the thought of going bungee jumping or speaking in public. Though it is now more appealing than sitting through a job performance review, filling out a college application, or dealing with a medical insurer about a planned surgery.

To view the study visit www.ing.com

New Review posted on Amazon - 5 stars by Midwest Book Review:
How to make sure your policy doesn't change behind your back, May 7, 2008

Modern funerals can be quite expensive, so life insurance can be the easiest answer. But how can you make sure that your life insurance will do what you pay it to do? "Questions and Answers on Life Insurance: The Life Insurance Toolbook" is a guide to help those who are concerned about life insurance policies make the right decisions by analyzing the fine print of it all - the different types of policies, evaluating the companies that hold the policy, trusted agencies, underwriting, and how to make sure your policy doesn't change behind your back. "Questions and Answers on Life Insurance: The Life Insurance Toolbook" is highly recommended to community library collections on personal finance and for anyone who is in the market for a life insurance policy.

Early policy year lapses have dropped to a 10-year low for all individual life insurance products combined. This is driven in large part by the lower early year lapse rates on level premium term plans and the fact that, over time, they continue to represent a larger portion of the total in-force business, according to a study by LIMRA and the Society of Actuaries (SOA)
The lapse rate for whole life plans for all product types and policy years combined was 3.5% on a policy basis and 4.4% on a face amount basis in 2003 and 2004, down from 3.9% and 5.8% respectively for the period 2001 to 2002. Although first year lapse rates have increased slightly in recent years, most durations lapse rates are at levels similar to or lower than the past. Total lapse rates for term insurance for all products and all policy years combined was 7% on a policy basis and 6.2% on a face amount basis, a decrease of 3.2 percentage points on a policy basis and 4.1 percentage points on a face amount basis from the 2001 to 2002 report. At the same time, term lapse rates have increased for policies in years 11 and later, reflecting the effect of shock lapse rates for level premium term. For more information, visit www.limra.com. - Reported on calbroker.com

Standard & Poor's Rating Services has a released a report that despite the stiff headwinds that the U.S. life insurance sector will face throughout 2008, Standard & Poor's Ratings Services is maintaining its stable outlook on the U.S. life insurance sector, according to an industry report card it published today. The article, which is titled "North American Insurance Sectors Retain Stable Outlooks, But Most Companies Are Feeling Market Pressures," says that this means that over the next six to 12 months, positive and negative rating actions should be about equal. Although we do not envision significant rating activity, the tendency is toward a moderately negative trend. The reports are available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. Market News Publishing (The Mc-Graw-Hill Companies); New York, NY; April 21, 2008--

The Internal Revenue Service recently issued its 2008 list of the 12 most egregious tax schemes and scams, highlighted by Internet phishing scams and several frivolous tax arguments. Topping this year’s list of scams is phishing, which encompasses numerous Internet-based ploys to steal financial information from taxpayers. New to the “Dirty Dozen” this year is a scheme, which IRS auditors discovered, that relates to unreasonable and/or excessive fuel tax credit claims. “Taxpayers should be wary of scams and promises to avoid paying taxes that seem too good to be true,” Acting IRS Commissioner Linda Stiff said. “There is no secret formula that can eliminate a person’s tax obligations. People should be wary of anyone peddling any of these scams.” Tax schemes can lead to problems for both scam artists and taxpayers. Tax return preparers and promoters also risk significant penalties, interest and possible criminal prosecution. Washington, D.C. Internal Revenue Service, U.S. Treasury Department - View List at: IR-2008-41 (this will take you the IRS website).

Fitch Ratings has released a special report 'U.S. Life Insurers: Large Commercial Mortgage Exposure Under Control' which summarizes Fitch's views on the commercial mortgage market, including an 2008 outlook and a comparison to the residential mortgage market, examines the impact on U.S. life insurers, and provides detailed information on the industry's investment exposure to directly placed mortgage loans and CMBS. This report states that Fitch does not expect weakness in the commercial mortgage market to negatively impact ratings for U.S. life insurers in 2008. Nevertheless, Fitch expects an increase in realized losses associated with commercial mortgage-related investments due to increased loan default rates and spread widening will negatively impact industry earnings in 2008.

The special report, 'U.S. Life Insurers: Large Commercial Mortgage Exposure Under Control' is now available at www.fitchratings.com under the following headers: Financial Institutions then Insurance then Special Reports. (Business Wire, April 15, 2008)

From 1990 to 2000, life expectancy for people in the U.S. with at least some college education rose 1.6 years, while remaining static for less-educated people. In 2000, those in the less-educated group could be expected at age 25 to live to about age 75, while those in the more-educated group could be expected to reach 82. Cigarette smoking may be the cause since more educated people are less likely to smoke.