Insurance Bailout Requests Raise Concerns
Insurance companies line up for bailout funds, but do they really need it?
Nov. 19, 2008 — -- About two months after the government first announced its multibillion-dollar bailout of insurance giant AIG, more insurance companies are lining up for federal dollars, leaving some consumers worried about their insurance policies.
In recent days, the Hartford Financial Services Group, Lincoln Financial Group, Genworth Financial and Aegon have all announced plans to apply for the U.S. Treasury Department's Capital Purchase Program, part of the government's $700 billion financial rescue package (also known as the Troubled Asset Relief Program, or TARP).
Insurance companies "are suffering very badly because of the losses in their investment portfolios," said Neena Mishra, a senior financial analyst who covers banking and insurance at the investment research firm Zacks.
The government, she said, "is a very attractive source of capital."
The news has led to an uptick in phone calls from concerned consumers to the National Organization of Life and Health Insurance Guaranty Associations, which represents life insurance guaranty funds that pay consumers' claims if an insurance company fails.
Worried callers are asking what would happen to their insurance policies if their insurers went under, according to the group's president, Peter Gallanis. They "want some reassurance on the condition of the investment or the contract that they've purchased," he said.
Exactly how worried should consumers be?
A Genworth Financial spokesman declined to comment on the issue. Lincoln Financial Group and Aegon did not return calls for comment.
Shannon Lapierre, a spokeswoman for Hartford, which has millions of policyholders in the United States, said that while the company is "financially strong and well-capitalized," the insurer decided that requesting a TARP investment was a prudent move given "the potential for more extreme market volatility."
