Category: Insurance

Biden Seeks to End Cheaper Obamacare Alternatives, Expect Another Supreme Court Smackdown

Mary Pat Campbell

Link: https://mishtalk.com/economics/biden-seeks-to-end-cheaper-obamacare-alternatives-expect-another-supreme-court-smackdown/

Excerpt:

Biden’s efforts to produce more inflation are nonstop, 24×7. His latest move is a set of regulations to force people into Obamacare despite the fact a District Court already ruled against his proposed regulations.

Biden Attempts to Make Healthcare Even More Expensive

To understand what Biden wants to do, and why the Supreme Court is likely to smack it down, we need to review a District Court ruling from 2020.

On July 24, 2020, CATO reported In a Win for Consumers, a Court Ruling Affirms the Legality of Short‐​Term Health Insurance Plans

….

Jam City, Dateline July 7, 2023

The Wall Street Journal comments on Biden’s Short-Sighted New Health Rule

Behold the President’s plan to limit short-term health insurance plans in order to jam more consumers into the heavily subsidized and regulated ObamaCare exchanges. The Health and Human Services, Labor and Treasury Departments on Friday proposed rules to roll back the Trump Administration’s expansion of short-term, limited-duration insurance (STLDI) plans. Since 2018 these plans have been available in 12-month increments, and consumers have been able to renew them for up to 36 months.

These plans are especially attractive to young people whose employers don’t provide coverage. Why would a healthy 26-year-old want to pay for maternity, pediatric and other services he probably won’t use in the near future?

The Inflation Reduction Act sweetened ObamaCare’s insurance premium tax credits that are tied to income. As a result, a 60-year-old making just above four times the poverty level has to pay only 8.5% of his income toward his insurance premium while the government picks up the rest. If premiums increase, government is on the hook for more.

Author(s): Mike Shedlock

Publication Date: 9 July 2023

Publication Site: Mish Talk

The 96 Billion Dollar Game: You Are Losing

Mary Pat Campbell

Link:https://burypensions.wordpress.com/2023/06/12/the-96-billion-dollar-game-you-are-losing/

Excerpt:

That was back in 1993 when the book on “how personal injury litigation has become a costly game to you’ came out so these quotes may be outdated in their numbers.

….

The Insurance Information Institute estimates that 40 percent of all medical malpractice insurance is written through companies owned by doctors. (page 88)

Litigation is necessary to help the litigants acquire the information necessary to settle cases and to resolve questions of injury, liability, value and law….I estimate that no more than ten percent of the lawsuits currently filed need information that can be obtained only through the deposition process. However, once the information has been obtained, usually within a matter of a few months after the filing, most of these cases should settle. (page 114)

In the less regulated or unregulated states, the insurance rates are lower because the companies can compete freely. The problem is not the insurance companies ripping off the public but the stifling regulations. (page 123)

….

“The most blatant examples of misguided regulatory involvement in automobile insurance prices occurred in Massachusetts and New Jersey”. Jean C. Hiestand, the V.P. General Counsel of State Farm Insurance Company, in Competition And the Rating Laws: Do They Make A Difference? “They not only pay the highest rates but a large percentage are in the involuntary markets”. (page 149)

Many states do not allow insurance protection for punitive damages because punitive damages are to punish you for conduct beyond ordinary carelessness….Where punitive damages are sought, you have read that juries sometimes find against an innocent person or company for large sums. Worse yet, such debt is not dischargeable in bankruptcy. (page 189)

Author(s): John Bury

Publication Date: 12 Jun 2023

Publication Site: burypensions

The real reason State Farm won’t sell home insurance in California anymore

Mary Pat Campbell

Link: https://www.washingtonexaminer.com/restoring-america/courage-strength-optimism/the-real-reason-state-farm-wont-sell-home-insurance-in-california-anymore?utm_source=deployer&utm_medium=email&utm_content=&utm_campaign=Beltway+Confidential&utm_term=

Excerpt:

I spoke to Rex Frazier, president of the Personal Insurance Federation of California, who cited several policies that no doubt contributed to State Farm’s decision to stop issuing policies, including various price controls that prevent insurers from raising prices to meet surging costs without the written approval of the California Department of Insurance.

“California is the only state in the country that doesn’t allow insurers’ rates to be based upon actual reinsurance costs,” Frazier said. “California’s regulations employ a legal fiction that each insurer uses its own capital to serve customers. As reinsurance costs go up, insurers cannot have their rates reflect those higher costs.”

Author(s): Jon Miltimore

Publication Date: 2 Jun 2023

Publication Site: Washington Examiner

Federal Financial Watchdog Aims to Expand Its Reach

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2023/04/24/federal-financial-watchdog-aims-to-expand-its-reach/

Excerpt:

The Financial Stability Oversight Council — the federal agency in charge of keeping the U.S. financial system upright — wants to change a 2019 document that limits how it tries to keep problems at life insurers, money market funds, cryptocurrency firms and other nonbank financial companies from destroying the economy.

FSOC announced Friday that it’s proposing a new version of the document that would free it from the 2019 restrictions.

….

FSOC started a fight with life insurers and their regulators by designating companies such as MetLife and Prudential Financial as “systemically important financial institutions,” or companies needing extra oversight.

Life insurers argued that the SIFI designation process was unclear, arbitrary and unfair.

MetLife sued FSOC over its SIFI designation. A federal appeals court threw out MetLife’s designation in 2018.

FSOC withdrew the last designation of a nonbank company — Prudential Financial — in October 2018.

…..

FSOC says it needs more flexibility to address potential risks as early and as quickly as possible, and that comparing the potential benefits of focusing attention on a nonbank company to the potential impact on the company is not useful.

“This is in part because it is not feasible to estimate with any certainty the likelihood, magnitude or timing of a future financial crisis,” FSOC said. FSOC argued that, if it does prevent a financial crisis, it would save the country trillions of dollars.

FSOC noted that it consults with state regulators and federal regulatory agencies regularly, and that its own members are made up mostly of state and federal agency heads.

“The council expects that most potential risks to financial stability will continue to be addressed by existing regulators rather than by use of the council’s nonbank financial company designation authority,” FSOC said.

Author(s): Allison Bell

Publication Date: 24 Apr 2023

Publication Site: Think Advisor

Obesity in Asia

Mary Pat Campbell

Link: https://www.genre.com/knowledge/publications/2023/april/ri23-1-en

Graphic:

Excerpt:

Figure 2 shows the incidence of cardiovascular disease and stroke in the male population.

This was derived from Gen Re’s Dread Disease experience study covering the period 2012–2015 and 2015–2019 for Hong Kong, Singapore and Malaysia. As per the analysis from the leading insurance companies of the respective market, 43% of men in Singapore, 40% of men in Malaysia and 26% of men in Hong Kong had critical illness claims due to cardiovascular disease and stroke between 2015 and 2019. When compared with the 2012–2015 analysis, it was noted that there is an increase in claims by 3% in Singapore, 10% in Malaysia and 1% points in Hong Kong, which may be associated with overweight and obesity or simply an older portfolio.

Due to increases in body weight and medical complications, insurance companies may be confronted with increasing claims which will impact their profitability. To mitigate this cost, insurance companies may have to increase the premium so as to commensurate with this rising claim cost. This increase in price will impact on the healthy population.

Health insurance premium has doubled in the past 10 years, but it is unclear how much of this premium is sufficient to cover the financial burden of the obesity pandemic. The evaluation of existing and developing new health coverages related to obesity-related conditions is an important consideration for the profitability of the health insurance providers.14

Author(s): Bharath UP

Publication Date: 12 April 2023

Publication Site: Gen Re

The Impact of Rising Rates on U.S. Insurer Investments

Mary Pat Campbell

Link: https://content.naic.org/sites/default/files/capital-markets-special-reports-impact-of-rising-rates.pdf

Graphic:

Excerpt:

As corporate bonds are mainly fixed rate, their relative value will decrease as floating rate investments
become more attractive with higher benchmark rates. That is, bond prices will fall as yields rise to make
them more attractive, given that their fixed-rate coupons will be lower. About half of insurer bond
investments are corporate bonds, and the vast majority of U.S. insurer corporate bond investments are
investment grade credit quality. From January 2022 to January 2023, the ICE Bank of America (BofA)
Investment Grade Corporate Bond Index, which measures the performance of investment grade
corporate debt, was down by about 14%.


Corporate bond yields have increased significantly since the beginning of 2022 with rising interest rates
and widening credit spreads. As of year-end 2022, investment grade and high-yield corporate bond
yields averaged 5.5% and 8.9%, respectively (refer to Table 1). Investment grade yields increased by
approximately 270 bps during 2022, while speculative-grade yields increased by about 370 bps.

Author(s): Jennifer Johnson and Michele Wong

Publication Date: 23 Feb 2023

Publication Site: NAIC Capital Markets Special Report

Managing Interest Rate Risk: ALM, Franchise Value, and Strategy

Mary Pat Campbell

Link: https://www.casact.org/sites/default/files/2021-03/9_Panning.pdf

Graphic:

Excerpt:

Fortunately, there is a solution to the dilemma just posed. It
consists in adopting a pricing strategy that substantially alters the
sensitivity of a firm’s total economic value to changes in interest
rates. In the example give earlier, where
a = 15% and
b = 0, the
duration of the firm’s franchise value and total economic value are
17.62 and 6.70, respectively. But suppose we alter the firm’s
pricing policy by changing these parameters to
a = 10% and
b = 1.
In this case the target return on surplus remains at 15% (given that
the risk-free yield remains at 5%), but the durations change from
17.62 to 7.62 for franchise value, and from 6.70 to 3.27 for total
economic value. The key insight here is that a firm’s pricing
strategy can significantly affect the duration of its franchise
value and, consequently, the duration of its total economic
value.

This insight suggests a more systematic approach to managing the
duration of total economic value: find a combination of the
strategy parameters
a and
b such that the return on surplus and the
duration of total economic value are both acceptable. This can be done either by systematic numerical search or by constrained optimization procedures. For example, if the firm in our example
wanted a target return on equity of 15% but a total economic value with a duration of zero, it should implement a pricing strategy with the parameters
a = 6.2% and
b = 1.763 to achieve
those objectives. The consequences of this and the two previously
mentioned pricing strategies are shown in Figure 3 for the three
different pricing strategies just described.

Author(s): William H. Panning

Publication Date: 2006

Publication Site: Casualty Actuarial Society (for exams)

Thousands of Retirees Can’t Withdraw Savings Invested in Firms Controlled by Indicted Financier Greg Lindberg

Mary Pat Campbell

Link: https://www.wsj.com/articles/thousands-of-retirees-cant-withdraw-savings-invested-in-firms-controlled-by-indicted-financier-greg-lindberg-6a268369?st

Excerpt:

The 52-year-old executive [Greg Lindberg] was indicted last month on federal charges that he defrauded his insurers by lending $2 billion of their funds to companies in his private conglomerate, while allegedly siphoning off huge sums to finance his lavish lifestyle. He has pleaded not guilty and is out on bail.

Until last July, Mr. Lindberg was in federal prison on bribery charges related to the insurers. He was released after 21 months when an appeals court overturned the conviction. A retrial is scheduled for November.

The executive also is fighting a drawn-out court battle with North Carolina regulators, who seized his insurers in 2019 and now say they should be liquidated. Mr. Lindberg, who previously lived in North Carolina and was the subject of investigative articles in The Wall Street Journal in 2019, says the insurers are healthy and he has a plan to rescue them.

What rankles Mr. Zintel and others is that they believe Mr. Lindberg is using their money to fight his legal entanglements, allowing him to continue living extravagantly even as they cut back. Among the alleged extravagances: The divorced executive has spent millions of dollars on gifts for women, according to court documents, including paying some women to produce offspring for him.

Some 70,000 holders of annuities totaling $2.2 billion are unable to withdraw their money, filings show. Many are retirees or conservative investors who bought five- to seven-year annuities in 2017 and 2018. Financial advisers typically marketed them as a safe, higher-yielding alternative to bank CDs.

Author(s): Mark Maremont, Leslie Scism

Publication Date: 26 Mar 2023

Publication Site: WSJ

Why the life insurance industry did not face an “S&L-type” crisis

Mary Pat Campbell

Link: https://econpapers.repec.org/article/fipfedhep/y_3a1993_3ai_3asep_3ap_3a12-24_3an_3av.17no.5.htm

PDF link: https://econpapers.repec.org/scripts/redir.pf?u=http%3A%2F%2Fwww.chicagofed.org%2Fdigital_assets%2Fpublications%2Feconomic_perspectives%2F1993%2Fep_sep_oct1993_part2_brewer.pdf;h=repec:fip:fedhep:y:1993:i:sep:p:12-24:n:v.17no.5

Full reference:

Elijah Brewer, Thomas H. Mondschean and Philip E. Strahan

Economic Perspectives, 1993, vol. 17, issue Sep, 12-24

Graphic:

Excerpt:

In most states, coverage under guaranty

funds is $300,000 in death benefits, $100,000 in

cash or withdrawal value for life insurance,

$100,000 in present value of annuity benefits,

and $100,000 in health benefits. Some states

cover all insurance policies written by an insol-

vent firm located in the state; others cover the

policies of residents only. In the case of unallo-

cated annuities such as GICs purchased by com-

panies to fund pension plans, some states cover

up to a certain amount, usually $5 million. Oth-

er states, such as California, Massachusetts, and

Missouri, do not cover GICs.

Because of variations in state guaranty

funds and in the way insolvencies are handled,

the parties bearing the costs of an insurance

failure differ across states. Surviving insurance

companies initially pay their assessments and

claim them as an expense on their federal corpo-

rate income tax return, reducing their federal

income taxes. As companies receive tax credits

in subsequent years, these credits become tax-

able income. As a result, the federal government

bears part of the cost of an insolvency since it

does not fully recover the present value of the

tax decrease granted in the assessment year. In

states with premium tax offsets, however, the

majority of the cost is paid by state taxpayers.

A study of 1990 life/health guaranty fund assess-

ments found that 73.6 percent was paid by state

taxpayers, 8.9 percent by federal taxpayers, and

17.5 percent by the equity holders of the surviv-

ing firms.

Author(s): Elijah Brewer, Thomas H. Mondschean and Philip E. Strahan

Publication Date: September 1993

Publication Site: Economic Perspectives, Chicago Fed

Group Life COVID-19 Mortality Survey – Updated through September 2021

Mary Pat Campbell

Link: https://www.soa.org/resources/experience-studies/2022/group-life-covid-19-mortality/

Report PDF: https://www.soa.org/48ff80/globalassets/assets/files/resources/research-report/2022/group-life-covid-19-mortality.pdf

Graphic:

Excerpt:

Table 5.2 shows more detailed industry results for the top ten industry segments by number of COVID claims. Most of these industries were in the top ten for the July 2021 report as well. As we now have more quarters with more complete results, both the A/E ratios for April 2020 through September 2021, as well as the COVID claims as a percentage of baseline claims, showed greater consistency across industries than in the previous report. Public Administration continues to be a key driver of high A/E ratios for the White Collar category. Doctors (Healthcare, also White Collar), Retail Trade (Grey Collar), and Misc. Services (Grey Collar) have the highest COVID claims as a percentage of baseline claims. Heavy Steel Manufacturing (Blue Collar) has a much lower A/E ratio than the other top 10 industries. In the table below, “B,” “W,” and “G” refer to Blue Collar, White Collar, and Grey Collar, respectively.

It should be noted that the high A/E ratios for Public Administration are driven by experience in the Executive, Legislative, and General Government segment (Standard Industry Classification [SIC] codes 9100-9199). This segment does not include police and fire and represents over 85% of claims in the broader Public Administration segment.

Video:

Publication Date: January 2022

Publication Site: Society of Actuaries Research Institute

Insurtech Regs, ‘Dark Pattern’ Spottting on NAIC’s To-Do List

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2022/12/16/insurtech-regs-dark-pattern-spottting-on-naics-to-do-list/

Excerpt:

In August [2022], Birny Birnbaum, the executive director of the Center for Economic Justice, asked the [NAIC] Market Regulation committee to train analysts to detect “dark patterns” and to define dark patterns as an unfair and deceptive trade practice.

The term “dark patterns” refers to techniques an online service can use to get consumers to do things they would otherwise not do, according to draft August meeting notes included in the committee’s fall national meeting packet.

Dark pattern techniques include nagging; efforts to keep users from understanding and comparing prices; obscuring important information; and the “roach motel” strategy, which makes signing up for an online service much easier than canceling it.

Author(s): Allison Bell

Publication Date: 16 Dec 2022

Publication Site: Think Advisor