Are states any good at regulating insurance?
October 8, 2019 by Ethan Schwartz
The insurance industry offers a test case of decentralized authority: Unlike much of the investment business, which is supervised at the federal level, insurers are almost entirely overseen by the states.
So how are states doing? Judging from what promoters of insurance products can say in their marketing materials, not so well.
Consider an unsolicited email I recently received from a company called AnnuityFYI. As the name suggests, it was touting annuities — products that, ideally, are supposed to guarantee a steady stream of income, typically to retirees. “The best of the bunch — products offered by Atlantic Coast Life Safe Haven — are paying just under or slightly above 4% annually, making it among the most generous no-risk investments in decades.”
A no-risk investment paying 4% annually? Sign me up! Just one problem. Atlantic Coast Life has only one financial-strength rating, a B++ from A.M. Best. Historically, 9% of companies with that financial rating have suffered impairment over the following 10 years, with “impairment” meaning a regulatory action ranging from restrictions on operations to insolvency and liquidation. Does that seem like “no-risk”?