The role of insurance is to help protect against life’s uncertainties. Life insurance, for example, can provide peace of mind that our loved ones will be looked after financially if we’re no longer there. In the current climate, having life insurance is surely a huge reassurance to the millions of Americans who have taken this precaution.
It is important to remember that in addition to the policy features and benefits themselves, the company underwriting your insurance policy is also a pertinent factor in deciding where to purchase life insurance. During the current exceptional circumstances – when companies of all kinds face unprecedented financial pressures – many policy owners may well be asking whether their insurer will definitely be there for them now or at some point in the future.
With so many companies, including both traditional insurers and online start-ups, now offering life insurance, here’s a quick checklist to give you peace of mind that your chosen insurer will be there when you need them most.
Can the insurer withstand extreme scenarios that could impact their assets and liabilities?
Insurers regularly “stress-test” their financial positions to assess how their assets might perform in a variety of scenarios and how this could affect their ability to meet their commitments to policy owners.
At New York Life, we frequently test our reserves and liquidity against potential catastrophic scenarios including:
Our analysis indicates that New York Life has the capital and liquidity to remain strong in the face of such shocks and more than meet all our obligations.
Have they enough experience to weather tough times?
A simple check for peace of mind is whether an insurer has a sufficiently long history to know how to navigate the unexpected. Has a company weathered previous pandemics? Stock market crashes? World wars? Economic recessions?
During our 175-year history, New York Life has weathered all these kinds of events, which in turn has heavily informed how we manage our business and plan for the long term. In particular, experience has given us the humility to know that we can’t predict the future, but with prudent management we can prepare for it.
What is the insurer’s financial strength rating?
Credit ratings are an independent assessment of a company’s financial strength. They are used to measure the ability of a wide range of organizations to meet their financial promises, from insurers and banks to corporate bond issuers, governments, and municipal authorities.
In the US, four major credit rating agencies assess life insurance companies: Moody’s, Standard & Poor’s, Fitch, and A.M. Best. As these agencies each use their own methodology, it’s worth seeing how your insurer is rated by a number of them and what each rating means (insurers publish their ratings on their websites).
New York Life currently has the highest financial strength ratings currently awarded to any U.S. life insurer by all four major ratings agencies.1
Does the insurer have a strong financial surplus position?
You might be wondering whether your insurer could meet its promise to you if a major crisis – such as a pandemic – means that thousands of other policy owners are making claims at the same time.
An insurer’s credit rating – as mentioned above – is a widely used indicator as to an insurer’s financial strength and ability to meet its obligations. In addition to considering factors like a company’s size and the riskiness of its assets and liabilities, something else you can check is its financial surplus.
A key element of a life insurance company’s credit rating, surplus indicates how much capital is held by an insurer above and beyond its known liabilities. Generally, the bigger its surplus, the better positioned it is to meet any exceptional levels of claims. New York Life, for example, had a company record surplus of nearly $27 billion at the end of 20192. The company paid more than $11.5 billion in total dividends and benefits to eligible policy owners in 2019 as well.3
Uncertain times demand a proven partner
There are many other measures that can help you to assess an insurer’s strength in these exceptional times, including how much liquidity (readily available cash) it holds and the diversity of its business model.
Partnering with an insurer with deep experience, a prudent approach to managing its business and its assets, and demonstrable financial strength should give peace of mind that any promises made to you today will still be met tomorrow.
SMRU Number: 1854712
1 Individual independent rating agency commentary as of 9/12/19: A.M. Best (A++), Fitch (AAA), Moody’s Investors Service (Aaa), Standard & Poor’s (AA+).
2 As of December 31, 2019, New York Life Insurance Company (NYLIC) has a statutory consolidated surplus and asset valuation reserve of $26.97 billion. You can view all audited statutory financial statements for New York Life at https://www.newyorklife.com/about/financial-information/2019-financial-information.
3Policy owner benefits primarily include death claims paid to beneficiaries and annuity payments. Dividends are payments made to eligible policy owners from divisible surplus. Divisible surplus is the portion of the company’s total surplus that is available, following each year’s operations, for distribution in the form of dividends. Dividends are not guaranteed. Each year the board of directors votes on the amount and allocation of the divisible surplus. Policy owner benefits and dividends reflect the consolidated results of NYLIC and its domestic insurance subsidiaries. Intercompany transactions have been eliminated in consolidation. NYLIC’s policy owner benefits and dividends were $7.67 billion and $7.47 billion for the 12 months ended December 31, 2019 and 2018, respectively. New York Life Insurance and Annuity Corporation’s policy owner benefits were $3.89 billion and $3.68 billion for the 12 months ended December 31, 2019 and 2018, respectively.
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