Investments vs Insurance

Cash value life insurance plans, including Universal and Whole Life, have a very definite and useful place in many (most?) folks' risk management portfolio. One of the criticisms of both UL and WL, though, is that they're "lousy investments."

Quite so.

In point of fact, life insurance professionals are essentially forbidden to use the terms insurance and investment(s) together. And that's as it should be: life insurance is a risk management tool, not an investment vehicle (although some products have investment-like properties).

I bring this up because of an email that went out to those of us who represent Assurity Life. Assurity offers "regular" life insurance and disability products (they're excellent for blue- and gray-collared clients), and they are serious about policing how their products are sold.

How serious?

This serious:

"If Assurity has knowledge that a variable contract is being replaced by an Assurity product and the producer is not licensed as a variable contract producer, the application and funds will not be accepted."

Apparently, some agents (who should know better) have been touting the guarantees inherent in fixed policies (such as UL and WL) based on the rather anemic growth in some prospects' variable life policies (the ones with investment-like sub-accounts). It is Assurity's stance that even discussing this kind of comparison amounts to offering investment advice, and they want no part of it.

I do see their point, although I think it's a far cry from comparing results with actual investment "advice." Still, it's their party, and they get to set their rules.

The bottom line, of course, is still the "need" for any life insurance. As Bob noted over four-and-a-half years ago: "Most folks don't want insurance. What they want is a way to protect their income and other cash assets."

Health Wonk Review: It's a New Year edition

Jared Rhoads hosts the first HWR of 2012, and it's a great way to kick off the new year.

This is Jared's 4th time hosting, and it shows, with interesting selections and helpful summaries.

Life (Former) Partners

Last Spring, we continued our coverage of Life Partners (LP), a holding company that buys and sells life insurance policies to (unwitting) investors.

Or should we say, sold:

"The SEC announced ... that disclosure and accounting fraud charges will be levied against Life Partners Holdings Inc ... The SEC also alleges that CEO Brain Pardo, general counsel Scott Paden and CFO David Marten misled shareholders ..."

No kidding.

As we noted in late 2010, LP's resident medical risk guru, a certain Dr Donald Cassidy, had a rather unenviable track record for picking, um, winners and losers: over 60% of the insureds had outlived his reported life expectancy, and almost a third had tripled it.

This boded ill for those suckers investors who did business with LP.

And it continues to do so:

"The SEC alleges that during the process of artificially underestimating the life expectancy of policyholders that Pardo and Paden then sold $11.5 million and $300,000 respectively in Life Partners stock at inflated prices."

So, $12 mil and their "clients" didn't even get t-shirts?

ObamaWaiver©s, Shecantbeserious, and Corruption

And yes, I realize that the title is somewhat redundant. According to Judicial Watch, our suspicions that these little party favors were, in fact, Thank You gifts to Obamastration supporters seem pretty well confirmed:

"While it's not possible using this HHS report to pin down the exact share of the $4.5 billion that was paid to plans covering union retirees - it seems very unlikely that share is less than 50%. About 12% of the US workforce is represented by unions."

As Mike recently pointed out, the "HHS report shows that the UAW retiree trust has received over $387 million - which is, all by itself, 8.5% of the total distributed ... Only 3 of these top 17 are corporate plans ... the remaining 14 are either union funds or public employer retiree plans."

And as if this transparently obvious payback wasn't enough, Ms Shecantbeserious also embarked on "on a massive, taxpayer-funded, multimedia campaign designed to promote Obamacare."

But then, IB readers are already familiar with MatlockCare©.

[Hat Tip: Mike F]

History Lesson

Many of my clients were children of the depression. The big one, where unemployment was 25% and many staples were rationed.

Their parents were part of the greatest generation. Men (and women) who fought for the rights of those they did not know, both here and abroad. Some gave their life so we could be free while others returned home but were shattered by the experience of war.

When they returned they attended school on the GI bill and got a "free" education that wasn't really free but paid for with blood and guts.

They bought homes with subsidized VA loans that were earned, not given to them.

The depression babies, those whose parents went to war and sometimes never came back only knew hard times.

Many of these people went to work for big companies like Southern Railways, Chesapeake, Norfolk, Eastern Airlines, Pan Am Airways, F W Woolworth. Companies that promised pensions when you retired.

Others went to work for Sears, J C Penney, GM, Chrysler, Greyhound Bus Lines, Atlantic and Pacific Tea Company. Companies that were rock solid and offered good pay plus a retirement plan.

Some companies no longer exist, others are around but a mere shell of what they once were and every one terminated their retirement plan years ago.

If you think the greatest generation and depression babies were stupid or planned to fail you are dead wrong. Many of them postponed purchases until they had the money to pay for things. The only thing they financed was a home and maybe a car.

Everything else was paid for in cash and money was always set aside for a rainy day.

Yet a lot of these people, people who are my clients, are living from SS check to SS check plus a little bit of savings. many still have mortgages even though they lived in the same home for 40 years. They have credit card debts with balances from buying food, medicine and other necessities.

They don't have cable TV or buy a new car every 2 years. They don't have iPad's or iPhones or big screen TV's.

They attend church and give a tenth of their monthly income to charity.

Many of them buy small life insurance policies and wish they could buy more. They regret relying on life insurance tied to their job or buying a term insurance plan that expired before they did.

These people did not plan to fail yet they are smarter and wiser than many of the people who profess to know it all and swear they will be financially set by the time they are 60.

They did not plan on working for a company that would go out of business, marrying a spouse whose health would take a turn for the worse, draining their life savings before finally leaving this earth.

Nor did they count on raising their children beyond age 18 or becoming a day care for their grandchildren.

Yet somehow the people who were born in the 60's through the 80's feel they are entitled to having everything given to them. They believe they are smarter than their parents and grandparents and will always have money in the bank, a good job and a steady income.

They believe they are immune to down sizing, divorce and paying for drug counseling for their children or hiring attorney's to keep them out of jail for a DUI.

They see life insurance as a temporary need that will end by the time they are 50.

If you are in this group maybe everything will work out as planned, but you don't have to be too old to know that man plans and God laughs.

MassDunh!

As we've previously remarked, MassCare's health insurance mandate lacks any real teeth. One reason for that is, of course, that the penalty for failing to purchase health insurance is a joke.

So what's the Bay State's answer?

"Massachusetts residents who do not have health insurance would face a higher financial penalty in 2012 ... the maximum penalty ... would be $105 for each month that an individual is not covered by health insurance"

Seriously? A hundred bucks?

Call that one a bargain and move on.

Oh, and how's that whole mandate working out?

Well, there's this:

"[T]he U.S. Census Bureau reported that at 5% ...Massachusetts had the lowest uninsured rate of any U.S. state."

Sounds good, right?

Aye, but here's the rub:

"Doc Shortages and Rising Health Care Costs"

Ooops.

[Hat Tip: FoIB Holly R]

Texas Loss

Residents of Texas hoping to have "free" help from government employees to find affordable health insurance are SOL.

A $2.8 million grant allowed the state to hire nine employees to staff a toll-free hotline. More than 6,000 Texans called in during the past year, seeking advice on how to find affordable coverage, or help filling out an insurance application, or fighting a denied claim.

A grant is "free money" taken from taxpayers and recycled by the government for projects they deem worthy.

Grants are not loans and never have to be repaid.

Seems to me $2.8 million for 9 employees is a bit excessive. They could have hired 9 licensed insurance agents for a lot less.

But less than a year after it opened, the Texas Consumer Health Assistance Program is preparing to shut down, a victim of Congress’s inability to agree on a federal budget for next year. The nine employees are likely to be dismissed in April. The events will stop and the toll-free hotline will redirect to a general consumer assistance number at the Texas Department of Insurance, which deals with all kinds of insurance and has less expertise in health coverage.

Less expertise . . . for $2.8 million.

Will someone explain why it takes taxpayer money, and a lot of it, to fund a project agents do every day at no cost to the taxpayer?