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Why You Should Check the Safety of Your Insurance Company

Even insurance industry "insiders" can get blindsided by looming disaster

by Bob Stokes
Updated: March 24, 2017

You buy insurance for protection, but some insurance companies themselves might be at risk. You need to know which ones are safe. "A massive insurance company failure" just made the news.

 

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[Editor's Note: The text version of the story is below.]

Most policyholders probably don't give a second thought to the financial stability of their insurance companies.

But when Prechter's Conquer the Crash published in 2002, the book cautioned otherwise:

Make sure that you have insurance policies only with the safest firms ….

The book went on to provide a list of America's highest-rated insurance companies.

Conquer the Crash went on to become a New York Times business bestseller, but unfortunately, that list and the book's overall message was largely ignored by the establishment media.

Then came the 2007-2009 financial crisis, and among the casualities was not just any insurance company, but the world's largest. A Sept. 27, 2008 New York Times headline referred to American International Group (AIG):

Behind Insurer’s Crisis, Blind Eye to a Web of Risk

The article included an August 2007 quote from a former AIG executive:

“It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions.”

About a year later, on Sept. 16, 2008, AIG had to be rescued by the federal government with an $85 billion bailout.

Of course, AIG was just one of several major financial institutions that was dealt a severe hit durng the financial crisis.

And, even today, the recommendation to "make sure that you have insurance policies only with the safest firms" still applies (The Atlanta Journal-Constitution, March 22):

A massive insurance company failure … eventually could leave many who bought long-term coverage without enough money to pay nursing home bills.

Penn Treaty Network Insurance Company and its subsidiary American Network Insurance Company are short nearly $4 billion needed to pay out long-term care insurance benefits to policyholders nationwide … . Earlier this month, a court ordered the liquidation of the Pennsylvania-based companies after years of legal battles failed to produce a plan to save them.

If this can happen during "good" economic times, imagine the fate of weak insurance companies during the next downturn.

Knowledge is the best preparation.

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