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IU professor publishes financial strength ratings and watch list for insurance companies
Sept. 4, 2001
EDITORS: Complementary media copies of the September issue of The Insurance Forum are available by calling 812-876-6502. Joseph Belth is available for interviews at the same phone number.
BLOOMINGTON, Ind. -- More than a quarter-century ago, as an Indiana University business professor, Joseph M. Belth began publishing a modest newsletter on the insurance business and hoped to raise awareness about issues of concern to consumers.
Now retired from teaching in IU's Kelley School of Business, Belth is still at it. A new, special issue of his award-winning publication, The Insurance Forum, features a ratings list including more than 1,700 life and health insurance companies and a watch list of troubled insurers.
"Financial strength is the most important factor that a consumer should consider in selecting a company from which to buy life insurance, health insurance or an annuity," said Belth, who received a George Polk Award in 1991 for his newsletter journalism. "The purpose of our annual ratings issue is to assist consumers and those who want to provide professional advice to consumers."
Belth has been publishing ratings issues since 1991. Other things that Belth has examined include insurance issues arising out of the Holocaust and what happens when insurance companies transfer blocks of policies to other insurance companies without properly informing policyholders.
The current issue contains a list of 3,782 financial strength ratings assigned to 1,715 companies by five ratings firms: A.M. Best Co., Fitch, Moody's Investors Service, Standard & Poor's and Weiss Ratings. The ratings -- produced as part of analyses done by the firms -- are otherwise difficult for consumers to obtain on their own. Most of the firms provide fundamental information on insurers through their Web sites, but not the kind of comparative data found only in Belth's newsletter.
The 36-page issue also contains a watch list of 729 companies which may have or may be developing financial problems. "In modern times, major life-health insurance companies almost always have been financially able to meet their obligations. Consequently, many people have fallen into the habit of taking the companies' financial strength for granted," he said.
However, in the last decade, a significant number of insurance companies in the United States and Canada have been taken over by regulators. Unlike the federally-mandated protections afforded to bank customers, there is no system of guarantees for insurance policyholders.
"Instead, insurance companies are assessed through state guaranty associations to cover the losses of failed companies," Belth noted. "In most states, insurance companies may take subsequent credit against their state taxes for assessments paid. Thus, most of the cost associated with failed companies is borne by state taxpayers.
"Despite the existence of guaranty associations, policyholders of failed insurance companies face uncertainties, delays, aggravation and possible losses," he added. "In some recent cases where insurance companies were taken over by regulators, moratoriums on cash values and policy loans left some policyholders unable to obtain access to their funds for long periods. There were also instances in which death benefits were delayed and annuity benefits reduced."
The Syracuse, N.Y., native is the author of several books, including Life Insurance: A Consumer's Handbook. For his book, Participating Life Insurance Sold by Stock Companies, he received the Elizur Wright Award for outstanding original contribution to the literature of insurance. Belth was a life insurance agent in the 1950s and is a past president of the American Risk and Insurance Association, an organization of insurance professors and others interested in insurance education.
In 1987, he received the Financial Security Nest Egg Award from the Life Communicators Association for "professional activities in communicating to the general public," and in 1999, the Huebner Gold Medal from The American College "in recognition of distinguished service to education and professionalism."
While Belth has gone to considerable effort to obtain, analyze and present the ratings information, he does not recommend that consumers rely on them alone.
"The rating firms generally do a good job of evaluating the financial strength of insurance companies. However, a rating is only an expression of a rating firm's opinion about the financial strength of a company," he said. "Ideally, you should not look at ratings alone. If possible, read the rating firms' reports. They may consist of only a few pages, but often they provide useful insight into a company's financial strength."
Copies of the September special ratings issue are available to consumers for $20 from The Insurance Forum. For more information, call 812-876-6502 or go to http://www.insuranceforum.com.
(George Vlahakis, 812-855-0846, gvlahaki@indiana.edu)