Overreacting To A Weakened Insurance Industry

Since the financial crisis dealt such a heavy blow to the financial system, many people have begun to question the stability of everything they once thought was certain. The insurance industry is no different in this regard. The American people are wondering if their coverage will be there when they need it.

Even as recently as last month, the federal government stated that it was planning to give an additional $22 billion to insurance companies. The response was understandable. The majority of the insurers were quick to decline the government aid. Insurance companies are not interested in showing signs of weakness for fear that they will lose public confidence.

There are certainly other reasons why consumers may be overreacting to the weakened insurance industry. Many insurers have lost considerable money in investments on stocks, bonds, real estate, and other assets that provide funding for the policies they offer. Insurers must fulfill their commitments regardless of the quality or performance of their investment portfolios. At the top of this list is guaranteed payments on variable annuities.

Financial advisors are struggling to keep insurance customers from cancelling their policies and looking for another without thinking carefully about the move. Not only does this harm the standing of the insurer, but you may have to deal with higher fees and tax penalties.

This is such a danger that there are some insurance agents and financial planners that may be suggesting their clients liquidate annuities or insurance policies to purchase coverage somewhere else. According to the National Association of Insurance Commissioners, consumers should be on the lookout for such people. Such agents or advisors may insist on immediate action; don’t be pressured to do something you’re not comfortable with.

There may be some valid reasons for concern, but there it is very easy to take an insurer’s difficulties and make it a reason to get rid of your policy and make the problems worse.