by L.A.S.
It just goes to show that wherever there's a free lunch, you're paying for it in the end.
Prime Capital Services, Inc., was named in a complaint filed by the SEC. Prime Capital allegedly lured seniors into buying unsuitable annuities with free lunches as bait.
Customers were told they could access their investments whenever they needed funds, but Prime Capital omitted informing them of fees for early withdrawals above a certain amount.
Saturday, August 29, 2009
Proposed Bill SB 1297 Would Give Tax Break for Annuities
by L.A.S.
You would get an fifty percent tax exclusion on your annuity under a pair of proposed Congressional bills called the Retirement Security for Life Act. Senators Kent Conrad of North Dakota and Senator Pat Roberts of Kansas are co-sponsors of this bill, SB 1297.
If you do not have an employer-sponsored retirement plan, you would benefit from this law. It provides for a fifty percent tax exclusion on up to $40,000 in annual income received from a non-qualified lifetime annuity.
A companion bill was introduced in the House, sponsored by Reps. Early Pomeroy of North Dakota and Ginny Brown-Waite of Florida.
You would get an fifty percent tax exclusion on your annuity under a pair of proposed Congressional bills called the Retirement Security for Life Act. Senators Kent Conrad of North Dakota and Senator Pat Roberts of Kansas are co-sponsors of this bill, SB 1297.
If you do not have an employer-sponsored retirement plan, you would benefit from this law. It provides for a fifty percent tax exclusion on up to $40,000 in annual income received from a non-qualified lifetime annuity.
A companion bill was introduced in the House, sponsored by Reps. Early Pomeroy of North Dakota and Ginny Brown-Waite of Florida.
Are Agents Employees or Independent Contractors?
by L.A.S.
Three former agents for Northwestern Mutual Life Insurance Company sued NML in a class-action lawsuit. They claimed that they were wrongfully designated independent contractors, and denied minimum wage, overtime, and other benefits.
The lawsuit is for $200 million.
It has been traditional that agents for almost all insurance companies are independent contractors who receive only commission for whatever they sell. I can tell you now that these agents would have to prove that NML closely supervised and controlled their hours and other details of their work.
Three former agents for Northwestern Mutual Life Insurance Company sued NML in a class-action lawsuit. They claimed that they were wrongfully designated independent contractors, and denied minimum wage, overtime, and other benefits.
The lawsuit is for $200 million.
It has been traditional that agents for almost all insurance companies are independent contractors who receive only commission for whatever they sell. I can tell you now that these agents would have to prove that NML closely supervised and controlled their hours and other details of their work.
Beneficial Will Stop Selling Life Insurance and Annuities
by L.A.S.
Another victim of the subprime debacle has hit the skids. Beneficial Financial Group, a Mormon-owned company, declared it will have to stop issuing new life insurance and annuities by Oct. 31 of this year. It will put 150 people out of work promptly, and concedes it cannot compete against bigger companies offering more products.
The cause of this turn of events is that Beneficial had about one-fourth of its assets in securities containing subprime mortgages.
Existing contracts will be honored, although the company is expected to expire in about 50 years.
To repeat, the current policies are good and will be honored. It is just not going to be able to sell new policies.
Another victim of the subprime debacle has hit the skids. Beneficial Financial Group, a Mormon-owned company, declared it will have to stop issuing new life insurance and annuities by Oct. 31 of this year. It will put 150 people out of work promptly, and concedes it cannot compete against bigger companies offering more products.
The cause of this turn of events is that Beneficial had about one-fourth of its assets in securities containing subprime mortgages.
Existing contracts will be honored, although the company is expected to expire in about 50 years.
To repeat, the current policies are good and will be honored. It is just not going to be able to sell new policies.
Movement for Federal Controls of Insurance Industry Misguided
by L.A.S.
The federal government has seized on the problems with one segment of one company, AIG, as a pretext for more government control of the whole insurance industry. The truth is that the insurance division of AIG, American General, was doing just fine (and BTW was under state regulation). The problems were in the division that was already supposedly being supervised by the federals, the Financial Products Corp., which indulged in risky equities investment.
However, neither do I see any value in creating an optional federal charter, called an OFC. The OFC would give insurance companies the option of being regulated at the state or at the federal level. One must acknowledge that in some states, it is possible for the insurance commissioner's office to be much too cozy with the industry, and refrain from too close scrutiny of financial records or safety.
I have mixed feelings about this proposal, I admit. I have already opined on the frustration of not being able to buy certain riders or products in one state that are easily available in another state, simply because the insurance commissioner's office of one state decided to allow that product.
The Financial Regulatory Reform report strongly recommends the creation of an Office of National Insurance (ONI). One of the jobs proposed for this ONI is the identification of insurance companies that should be supervised as Tier 1 Financial Holding Companies (FHCs). A Tier 1 FHC is defined as a holding company “whose combination of size, leverage and interconnectedness could pose a threat to financial stability if [they] failed.” They would come under the supervision of the Federal Reserve who would supposedly hold them to a higher standard and do everything to prevent these companies from failing.
Insurers are expressing concern that the Fed would not be working in harness with an actual insurance regulator. This is in contrast with the rest of the financial services industry which has a federal regulator in the SEC. The Fed would not concern itself with solvency, but rather with the company's impact on the overall economy.
The Fed already has many critics of its authority. Does it really serve anyone's best interest to allow it to insert itself into another segment of the finance industry, when it already seems stretched to the limit in trying to monitor the banking industry?
Besides the creation of the ONI and an expansion of the Fed, the report is also spurring talk of creation of a Consumer Financial Protection Agency (CFPA). This agency is supposedly going to represent consumer interests at the administrative level regarding credit, mortgage and title insurance coverage. Whether it will also monitor the insurance industry in spite of intense lobbying against it, is anyone's guess at the moment.
Again, I have mixed feelings about this new agency. Much depends on exactly who will be appointed to serve in this agency and whether they will just be another shill for the industry. The devil is always in the details.
On the one hand, it has the potential to finally bring the credit industry to heel and cap interest rates on credit cards and other abuses. Have you never wondered why your credit card bills are always addressed to processing stations in Delaware and Dakota? That is because those states have no cap on credit card interest rates or any other meaningful regulation. It would also give consumers the option to buy new plain-vanilla insurance products and provide transparent pricing.
On the other hand, adding another layer of bureaucracy because the regulators we have, failed to do their job, is hardly cost-efficient. It is hardly an example of good government. Although if the Congress writes the bill so as to streamline (make that read 'fire') ineffective federal agencies like the SEC or FINRA (the SEC's enforcement arm) or the Federal Reserve itself, then that would be a net gain for consumer rights and for the bean-counters.
If any or all of the existing agencies had been doing their job, and regulating the finance and investment community, we might have averted the bloodbath of last summer and fall. How did earlier administrations allow the annulment of the Glass-Steagall rules? Rules that had prevented a recurrence of the errors and wild ways of the heady 1920's?
And then there is the really scary problem that is not addressed by any legislation anywhere, and that is that most of the people working for the federal government just cannot understand the complicated financial instruments now being used and marketed across the globe. What if Congress convened a hearing or an investigation into bank failures, and the crooks got off because our representatives really don't know a bundled mortgage from a certificate of deposit? Or an ARM from their leg??
Sorry to joke, but tragically, the American public does not generally have senators and representatives who can fathom the technical jargon of the industry. It is not that they are dumb; they are just in the dark. As are we all.
The federal government has seized on the problems with one segment of one company, AIG, as a pretext for more government control of the whole insurance industry. The truth is that the insurance division of AIG, American General, was doing just fine (and BTW was under state regulation). The problems were in the division that was already supposedly being supervised by the federals, the Financial Products Corp., which indulged in risky equities investment.
However, neither do I see any value in creating an optional federal charter, called an OFC. The OFC would give insurance companies the option of being regulated at the state or at the federal level. One must acknowledge that in some states, it is possible for the insurance commissioner's office to be much too cozy with the industry, and refrain from too close scrutiny of financial records or safety.
I have mixed feelings about this proposal, I admit. I have already opined on the frustration of not being able to buy certain riders or products in one state that are easily available in another state, simply because the insurance commissioner's office of one state decided to allow that product.
The Financial Regulatory Reform report strongly recommends the creation of an Office of National Insurance (ONI). One of the jobs proposed for this ONI is the identification of insurance companies that should be supervised as Tier 1 Financial Holding Companies (FHCs). A Tier 1 FHC is defined as a holding company “whose combination of size, leverage and interconnectedness could pose a threat to financial stability if [they] failed.” They would come under the supervision of the Federal Reserve who would supposedly hold them to a higher standard and do everything to prevent these companies from failing.
Insurers are expressing concern that the Fed would not be working in harness with an actual insurance regulator. This is in contrast with the rest of the financial services industry which has a federal regulator in the SEC. The Fed would not concern itself with solvency, but rather with the company's impact on the overall economy.
The Fed already has many critics of its authority. Does it really serve anyone's best interest to allow it to insert itself into another segment of the finance industry, when it already seems stretched to the limit in trying to monitor the banking industry?
Besides the creation of the ONI and an expansion of the Fed, the report is also spurring talk of creation of a Consumer Financial Protection Agency (CFPA). This agency is supposedly going to represent consumer interests at the administrative level regarding credit, mortgage and title insurance coverage. Whether it will also monitor the insurance industry in spite of intense lobbying against it, is anyone's guess at the moment.
Again, I have mixed feelings about this new agency. Much depends on exactly who will be appointed to serve in this agency and whether they will just be another shill for the industry. The devil is always in the details.
On the one hand, it has the potential to finally bring the credit industry to heel and cap interest rates on credit cards and other abuses. Have you never wondered why your credit card bills are always addressed to processing stations in Delaware and Dakota? That is because those states have no cap on credit card interest rates or any other meaningful regulation. It would also give consumers the option to buy new plain-vanilla insurance products and provide transparent pricing.
On the other hand, adding another layer of bureaucracy because the regulators we have, failed to do their job, is hardly cost-efficient. It is hardly an example of good government. Although if the Congress writes the bill so as to streamline (make that read 'fire') ineffective federal agencies like the SEC or FINRA (the SEC's enforcement arm) or the Federal Reserve itself, then that would be a net gain for consumer rights and for the bean-counters.
If any or all of the existing agencies had been doing their job, and regulating the finance and investment community, we might have averted the bloodbath of last summer and fall. How did earlier administrations allow the annulment of the Glass-Steagall rules? Rules that had prevented a recurrence of the errors and wild ways of the heady 1920's?
And then there is the really scary problem that is not addressed by any legislation anywhere, and that is that most of the people working for the federal government just cannot understand the complicated financial instruments now being used and marketed across the globe. What if Congress convened a hearing or an investigation into bank failures, and the crooks got off because our representatives really don't know a bundled mortgage from a certificate of deposit? Or an ARM from their leg??
Sorry to joke, but tragically, the American public does not generally have senators and representatives who can fathom the technical jargon of the industry. It is not that they are dumb; they are just in the dark. As are we all.
Texas Liquidating Memorial Life Insurance
by L.A.S.
Better check the name on that pre-need funeral policy of yours -- if you bought it from Memorial Life Insurance, it is now being liquidated by the state of Texas. Memorial Life Insurance sold funeral benefit contracts. After suffering a net loss of $2.3 million in 2008, the company was barred from accepting any more applications.
Fortunately your loss is protected under the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association Act. You must keep up the payments to maintain the policy in force, but check with the State of Texas insurance commissioner's office to see how to make out your checks.
Better check the name on that pre-need funeral policy of yours -- if you bought it from Memorial Life Insurance, it is now being liquidated by the state of Texas. Memorial Life Insurance sold funeral benefit contracts. After suffering a net loss of $2.3 million in 2008, the company was barred from accepting any more applications.
Fortunately your loss is protected under the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association Act. You must keep up the payments to maintain the policy in force, but check with the State of Texas insurance commissioner's office to see how to make out your checks.
Friday, August 28, 2009
Ameritas Fined by Financial Industry Authority (FINRA)
The Financial Industry Regulatory Authority (FINRA) fined Ameritas in a case in which one of its brokers convinced customers to borrow against their homes to buy life insurance.
FINRA took action against Ameritas for failing to adequately oversee New Jersey broker Nancy Ziering. She convinced customers to borrow against their homes in order to buy variable universal life insurance policies to fund college or retirement expenses. The company was fined $100,000.
FINRA issued a statement in which it said that customers should not put their homes at risk in order to buy securities. Ziering recruited customers in seminars and other college-planning presentations. She sold at least 90 variable universal life policies through Ameritas. FINRA feels that the plans she presented were much too complicated and required customers to adhere to strict plans for 20 years.
Ameritas had already rescinded such policies issued to six customers before the disciplinary action.
FINRA took action against Ameritas for failing to adequately oversee New Jersey broker Nancy Ziering. She convinced customers to borrow against their homes in order to buy variable universal life insurance policies to fund college or retirement expenses. The company was fined $100,000.
FINRA issued a statement in which it said that customers should not put their homes at risk in order to buy securities. Ziering recruited customers in seminars and other college-planning presentations. She sold at least 90 variable universal life policies through Ameritas. FINRA feels that the plans she presented were much too complicated and required customers to adhere to strict plans for 20 years.
Ameritas had already rescinded such policies issued to six customers before the disciplinary action.
Ohio Advisors Busted by SEC for Inflating Fees
The SEC charged two Ohio-based investment advisors with fees-related fraud. The two advisors, Robert Pinkas and Tab Keplinger, of Brantley Capital Management (which was also charged), with overstating the value of the investment portfolio so they could charge higher fees.
Two failing private companies unfortunately made up more than half of the investment portfolio of BCM, an investment company based in New York.
The investment period in question was from 2002 to 2005. Pinkas was CEO of both Brantley and BCM. Keplinger was the part-time CFO of both companies.
Pinkas has engaged an attorney to fight the charges, while Keplinger has settled the charges without admitting or denying the allegations. He consented to a fine with a five-year ban on serving as an officer or director of a public company.
Two failing private companies unfortunately made up more than half of the investment portfolio of BCM, an investment company based in New York.
The investment period in question was from 2002 to 2005. Pinkas was CEO of both Brantley and BCM. Keplinger was the part-time CFO of both companies.
Pinkas has engaged an attorney to fight the charges, while Keplinger has settled the charges without admitting or denying the allegations. He consented to a fine with a five-year ban on serving as an officer or director of a public company.
Monday, August 24, 2009
Health Co-ops Are Making Medicine Fun Again
by L.A.S.
Another option when it comes to dispensing health care is the health co-op, where the patient members are in control of the entity.
One example is the Group Health Cooperative in Oregon. It was created way back in 1947 by farmers and loggers who pooled their resources to cover the most basic primary care. Since that time, the co-op has grown to over a half million members, the third largest insurer in Oregon.
It operates similar to an HMO. It has premiums and co-pays. Patients have to see providers who are in the network. Doctors work for the company and are paid a salary. This means they are not forced to cram twenty or more patients into their daily schedules.
They have more time with each patient and can be more proactive.
One of the great features of the Oregon co-op is that they have invested in electronic medical records which reduces errors, enables doctors to coordinate care, and also lets patients check their charts online. Whether it was this innovation or the emphasis on primary care, the result has been a drop in emergency room costs by 29 percent.
But replicating the success of Group Health is a real challenge. Many health care co-ops were born in the Great Depression and folded later when government funding was withdrawn.
However, HHS Cabinet Secretary Kathleen Sebelius has signaled that the Obama administration might support the idea of co-ops as an option to reduce the cost of health care.
It is an option worth serious consideration, even with all the challenges of starting one from the ground up.
An article on health co-ops ran in USA Today and you may read it here: http://www.usatoday.com/money/industries/health/2009-08-20-group-health-insurance_N.htm
Another option when it comes to dispensing health care is the health co-op, where the patient members are in control of the entity.
One example is the Group Health Cooperative in Oregon. It was created way back in 1947 by farmers and loggers who pooled their resources to cover the most basic primary care. Since that time, the co-op has grown to over a half million members, the third largest insurer in Oregon.
It operates similar to an HMO. It has premiums and co-pays. Patients have to see providers who are in the network. Doctors work for the company and are paid a salary. This means they are not forced to cram twenty or more patients into their daily schedules.
They have more time with each patient and can be more proactive.
One of the great features of the Oregon co-op is that they have invested in electronic medical records which reduces errors, enables doctors to coordinate care, and also lets patients check their charts online. Whether it was this innovation or the emphasis on primary care, the result has been a drop in emergency room costs by 29 percent.
But replicating the success of Group Health is a real challenge. Many health care co-ops were born in the Great Depression and folded later when government funding was withdrawn.
However, HHS Cabinet Secretary Kathleen Sebelius has signaled that the Obama administration might support the idea of co-ops as an option to reduce the cost of health care.
It is an option worth serious consideration, even with all the challenges of starting one from the ground up.
An article on health co-ops ran in USA Today and you may read it here: http://www.usatoday.com/money/industries/health/2009-08-20-group-health-insurance_N.htm
Five Reasons You Need Health Insurance
by L.A.S.
I came across this list the other day and it is a good reminder of why people benefit from having some form of health insurance. With all the hoopla over Obama-care or public option or any of the other forms of health insurance, we may need to step back a second and remind ourselves why we need it.
Number One on the list is that having insurance improves your access to quality care. I am embarrassed to have to list this item. To me it is shameful that in the richest country on earth, you are looked at as if you were a bank robber if you walk into a clinic or hospital without insurance. But there it is. And don't tell me that anyone can get health care if they are willing to pay the price. I have been turned away from local providers (years ago) because the clinic was not accepting patients without insurance.
Number Two: You get better access to preventive care. This is a biggie for those with chronic conditions such as high blood pressure or diabetes, because good monitoring of your condition can keep you out of the hospital with serious complications! The flip side is that people are not getting access to information to help them stay healthy. The doctors are so rushed that he has no time to do much more than write another prescription. You have to pester the nurses or get to work digging up information from online, or from support groups, or from nutritionists, or from health food centers.
Number Three: It can keep you from facing financial ruin due to medical expenses. While some people still have to deal with financial hardship if their treatment is out of network or not covered, insurance is the best bet against losing one's home or savings.
Number Four: You pay a lower rate. The insurance plan negotiates a better rate for services, lab tests, and hospital beds under group coverage. The truth is, those without insurance usually are charged the top-gouge price.
Number Five: Peace of mind -- aka being able to sleep at night. It is hard enough to handle your health worries without also having the weight of the final bills on your mind. Just concentrate on getting well and let the providers and insurers handle the bills.
-- Best wishes to all
I came across this list the other day and it is a good reminder of why people benefit from having some form of health insurance. With all the hoopla over Obama-care or public option or any of the other forms of health insurance, we may need to step back a second and remind ourselves why we need it.
Number One on the list is that having insurance improves your access to quality care. I am embarrassed to have to list this item. To me it is shameful that in the richest country on earth, you are looked at as if you were a bank robber if you walk into a clinic or hospital without insurance. But there it is. And don't tell me that anyone can get health care if they are willing to pay the price. I have been turned away from local providers (years ago) because the clinic was not accepting patients without insurance.
Number Two: You get better access to preventive care. This is a biggie for those with chronic conditions such as high blood pressure or diabetes, because good monitoring of your condition can keep you out of the hospital with serious complications! The flip side is that people are not getting access to information to help them stay healthy. The doctors are so rushed that he has no time to do much more than write another prescription. You have to pester the nurses or get to work digging up information from online, or from support groups, or from nutritionists, or from health food centers.
Number Three: It can keep you from facing financial ruin due to medical expenses. While some people still have to deal with financial hardship if their treatment is out of network or not covered, insurance is the best bet against losing one's home or savings.
Number Four: You pay a lower rate. The insurance plan negotiates a better rate for services, lab tests, and hospital beds under group coverage. The truth is, those without insurance usually are charged the top-gouge price.
Number Five: Peace of mind -- aka being able to sleep at night. It is hard enough to handle your health worries without also having the weight of the final bills on your mind. Just concentrate on getting well and let the providers and insurers handle the bills.
-- Best wishes to all
Patient Recounts 'Death Panel' Experiences in 2007
by L.A.S.
It may shock you to know that there really have been so-called 'death panels' employed to triage organ transplant cases. One patient who went through what must have been a draining experience wrote about it on another blogspot blog called Southeast to Southwest (at swse.blogspot.com).
Death panels, aka God committees, have to evaluate the patient's chances for a good outcome for the terribly expensive organ transplant surgery. It is a fact of life that there are not enough organs to go around, and we really ought to push for more of us to volunteer usable organs upon our passing so that another can live.
The whole fascinating, engrossing account can be read here at: http://sesw.blogspot.com/2009/08/i-went-before-real-death-panel.html
It may shock you to know that there really have been so-called 'death panels' employed to triage organ transplant cases. One patient who went through what must have been a draining experience wrote about it on another blogspot blog called Southeast to Southwest (at swse.blogspot.com).
Death panels, aka God committees, have to evaluate the patient's chances for a good outcome for the terribly expensive organ transplant surgery. It is a fact of life that there are not enough organs to go around, and we really ought to push for more of us to volunteer usable organs upon our passing so that another can live.
The whole fascinating, engrossing account can be read here at: http://sesw.blogspot.com/2009/08/i-went-before-real-death-panel.html
Whistleblower Leads to $302 Million Fine Against Quest Diagnostics
(by L.A.S)
(Not sure if I ever referred to this case before, but it bears repeating anyway.)
The New York Times reported in April of this year that Quest will pay a fine of $302 million as a result of a defective test kit produced by its subsidiary, NID. NID produced a kit that was supposed to detect levels of parathyroid hormone. However, the kit produced such inaccurate and unreliable lab results, that doctors complained.
Shockingly, there are no standards regarding how reliable a lab test has to be, nor testing to ensure that it is reliable. To put it another way, there is no standardization and no FDA approval needed.
A California businessman and biochemist named Thomas Cantor tried to blow the whistle with detailed complaints about the test, but was rebuffed. He later hired some attorneys to help him.
Cantor will receive a share of the settlement amounting to about $45 million, which he states he intends to donate to drug research.
The NY Times article is here: www.nytimes.com/2009/04/16/business/16tests.html?_r=1&partner=rss&emc=rss
(Not sure if I ever referred to this case before, but it bears repeating anyway.)
The New York Times reported in April of this year that Quest will pay a fine of $302 million as a result of a defective test kit produced by its subsidiary, NID. NID produced a kit that was supposed to detect levels of parathyroid hormone. However, the kit produced such inaccurate and unreliable lab results, that doctors complained.
Shockingly, there are no standards regarding how reliable a lab test has to be, nor testing to ensure that it is reliable. To put it another way, there is no standardization and no FDA approval needed.
A California businessman and biochemist named Thomas Cantor tried to blow the whistle with detailed complaints about the test, but was rebuffed. He later hired some attorneys to help him.
Cantor will receive a share of the settlement amounting to about $45 million, which he states he intends to donate to drug research.
The NY Times article is here: www.nytimes.com/2009/04/16/business/16tests.html?_r=1&partner=rss&emc=rss
Ohio broker barred after stealing sisters' inheritance
Richard Wood, an agent in Miamisburg, Ohio who was with American General Securities Inc., promised to invest two sisters' money but used the funds for himself.
The sisters were beneficiaries of an aunt who had been a client of Wood. Wood provided both sisters with a false account number for a fake brokerage account. He was eventually found out, and forced to repay one of the sisters. The firm repaid the other sister.
The Financial Industry Regulatory Authority (FINRA) barred Wood in an agreement in which Wood did not have to admit or deny the allegations.
Lucky for the sisters, they have their money back.
The sisters were beneficiaries of an aunt who had been a client of Wood. Wood provided both sisters with a false account number for a fake brokerage account. He was eventually found out, and forced to repay one of the sisters. The firm repaid the other sister.
The Financial Industry Regulatory Authority (FINRA) barred Wood in an agreement in which Wood did not have to admit or deny the allegations.
Lucky for the sisters, they have their money back.
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