Will Your Life Insurance Company Be Able to Pay Claims?

After the federal bailout of AIG, some have questioned the ability of an insolvent insurance company to pay benefits to its policyholders. Even amidst the current economic turmoil, however, one thing you do not have to worry about is your insurance company failing to pay benefits to you. Historically, insurance companies have become insolvent, but there are several reasons that policyholders have never walk away empty-handed.

First, each state carefully regulates its insurance industry. Each insurance company is at all times required to maintain a statutorily specified percentage of its assets in liquid form so that it can pay benefits without delay.

Second, insurance companies also insure themselves through reinsurance. Reinsurance is how large insurance companies spread their risk exposure.

Third, a struggling company also makes for a great acquisition target for other insurance companies. Regardless of merger or acquisition, your policy terms will not change.

Finally, in terms of AIG, the bailout was in response not to its insurance business, but instead to a liquidity crisis generated by over issuing credit default swaps. Additionally, the AIG subsidiaries that actually issue insurance policies have remained financially stable (for all the reasons mentioned above) and have had no problems paying insurance benefits to policyholders.
If you have further questions or concerns, please contact Doctor Disability at 866-899-7318 or visit www.doctordisability.com.

Interviewing Part II: Inspection and Analysis

Part II of the interview process is your inspection and analysis of the potential employer.

First, you should investigate the work surroundings and any satellite facilities. You should note the work environment and also the people. Is the practice efficient? Are the offices clean and organized? Are the people welcoming? How long are patients kept waiting? If you do not have time to investigate after part I of the interview, you may need to schedule a follow-up visit.

Second, you should perform financial due diligence. Ask for fiscal information in a professional manner and be wary of a group that is unable or unwilling to produce basic financial documents. Your investigation will vary depending on the practice type, but you can focus your investigation on these general areas:

• The overhead-to-revenue ratio is one of the most important financial indicators. A group’s expenses should not exceed 50 percent of their revenue.
• Determine how the income distribution plan is structured. Are salaries divided evenly or productivity-based?
• Ask about the group’s long-term financial goals. The employer should be able to provide you with concrete and realistic answers.
• You should inquire about the group’s practice debt and repayment schedules.
• Ask for a list of the provider contracts and then investigate those companies and contracts, especially if one company is a source of a large percentage of the group’s patients.
Finally, the NEJM offers an interesting perspective on the internal due diligence that employers perform on their own group in order to ensure successful recruitment.