There was interesting article published on TheStreet.com on 5/13/2009, title “AIG, MetLife, Allstate Fail Our ‘Stress Test’.
We all know that the economy is not in great shape, regardless of recent stock market performance. You have are also probably aware of the difficulties many banks and lending institutions are having. While I hate to make “blanket statements”, it is safe to say that a company has anything to do in Financial Services (Banks, Mortage Companies, Brokerages, and yes Insurance Companies) then those companies have had to take a hard look at the state of their businesses.
What does this mean to you? Most people will sweep this under the rug along with the other “white noise” that comes each day with regard to the economy. While I don’t believe we are facing a financial armageddon, I do think you should pay close attention to any news that offers negative views with respect to Insurance Carriers! Think about it, the three main Insurance Carriers mentioned in this article are household names! There is a good chance that you or someone you know has some form of insurance coverage with one of these companies. While I am not saying that these carriers are at a point where your personal coverage is in jeoporady, but would you take that chance? What is more likely to happen is that these companies are going to need to find capital from somewhere. Now, let’s think about this…what are the possible sources of capital?
- Increase Investment Gains (good luck with that)
- Decrease Insurance Losses (that is there job, but people have wrecks, houses burn down, life insurance claims pay out)
- Issue Debt / Borrow Money (we have all seen how good the use of debt works out for people / corporations / and Governments)
- Increase Revenue (that means your insurance premiums are going up)
Of that list of capital sources, which one is the easiest to pull off? That’s right, raising your premiums. In my years as an Insurance Professional, I have found that insurance consumers are loyal (the good customers). Many people just say, I have been at XYZ Insurance Company for 15 years, why should I switch? That is what most insurance carriers (and agents) like to hear. They pour the dirty water down and you drink it like it was Kool-Aid!