Insurance And Reinsurance Like It Is This Decade Past And Today ....
Denials, Non-Payments, Delayed And Discounted Claim Payments Are
Alleged To Be In The Majority, Tied To Bad Faith Insurers And
Reinsurers Fraudulent Activities|
By FBIC (www.badfaithinsurance.org)
May 16, 2005
NEW YORK (FBIC) -- "Reinsurance" as it is called is simply insurance for insurance companies in paying (or not paying) claims. Insurance is highly regulated by states ... reinsurance is not regulated. (FYI, closely followed by or associated to reinsurance is "insurance run-off" which is the liquidation of insurance companies which in most cases they are also not regulated and to the extent that FBIC is aware are/can be moreso like that of playing in the old wild west and allegedly where fraud runs rampant. For example, Lloyds of London, headquartered in Great Britain and because of mismanagement and huge losses, which finds itself due to mismanagement and fraud now 40% owned by the British Government and its People, was a big player in "Reinsurance and Insurance run-off, and they lost big $$$". In addition and also FYI, "a cap cover" is where a maximum $$ amount of reinsurance is in place lending control to the Reinsurer).
All insurers are supposed to play by the rules according to state laws but they don't like regulation especially as bad faith insurers and many reinsurers have become accustomed over the years and decades of denying, contesting or not paying claims in bad faith "according to their own laws and rules" ... and instead not playing by the laws set up by states congressional authorities.
In addition, if not for appearance purposes, the laws are supposed to be enforced by state governments insurance regulatory agencies but they aren't appropriately set up to combat bad faith insurance according to the laws in place. Over the years and decades, regardless of many appearances to the contrary, with little or few exceptions especially when the issues are small, states' regulatory agencies overwhelmingly favor the insurance companies and industry when there are disagreements between the insurers and policyholders,. In fact, even though it has repeatedly been exposed that insurers may often lie to regulative authorities, regulators rarely question insurance companies representatives and answers in response to consumers and policyholders complaints and issues. fraudulent activities and the non-payment of claims by reinsurers is at the root of many if not most claimants complaints and bad faith insurers practices.
FBIC in its investigations has found that regardless of the terminology as to whether its called traditional reinsurance, non-traditional reinsurance, finite (re)insurance or mitigation loss (re)insurance, many if not most "bad faith" insurers for the most part allegedly have one thing in common ... "FRAUD" by runoff companies, their own reinsurance companies in being able to allegedly avoid and not pay policyholders legitimate claims ... and maximize both bad faith insurers and reinsurers (and runoff companies) own profits.
That is, while insurers may lie to state insurance commissions, they utilize relatively sophisticated forms of deception to fraudulently cheat insurance policyholders on a widespread basis out of receiving proper payment of their claims to the great financial benefit and self enrichment of top management's own insurance companies, the reinsurer companies they have contracted with and of course themselves. Hold onto your seats as to what FBIC has found shocking evidence of because you are not going to believe how and to what degree this pervasive shell game works.
An example of how reinsurance really works
Let's say that a large insurance company (Insurer A) or possibly even a number of insurance companies comprising a group of insurers (Group insurer A) contracts with a reinsurance company (Reinsurer B) or a consortium or number of reinsurance companies syndicated together comprising a Group of reinsurers (Group Reinsurer B) to have $500 million of its insurance company's or insurance companies insurance policies sold to policyholders covered through reinsurance to have them pay their policyholders claims. Insurer company A negotiates with Reinsurer company B and makes an agreement. whereby Insurer A agrees to buy $500 million dollars worth of reinsurance from Reinsurer B for the negotiated amount of $250 million. In return Reinsurer B agrees contractually to assume all liability to pay Insurer A's $500 million worth of its policyholders potential claims and related liabilities such as legal fees, etc..
How can a reinsurer get paid $250 million for $500 million face value worth of insurance policies and still make money and/or not lose money? The state laws and thus the state and federal Courts are allegedly insurers and reinsurers best friends. Reinsurer B uses the courts and all legal (and non-legal) means to delay, not pay or defer payment of Insurer A's policyholder's claims, thereby facilitating court mechanisms directed toward not paying claims or delaying payment of claims so Reinsurer B gets to keep most of the $250 million dollars it received from insurer A and invests it (called "the float) and makes money for as long as it gets to keep the money and not have to payout the money for claims and related expenses. In addition, FBIC has seen defense counsel require and request protective orders in order to keep illicit damaging evidence that was uncovered in the discovery process from being exposed and reaching the jury's or public's eyes and scrutiny, thus preserving the sanctity and good reputations of Insurer A. Claimants and no one other than the Insurer A for the most part never gets to know about the existence of Reinsurer B and that it is the Reinsurer B that is fighting and not paying their claim. The claimant even in its correspondence with the insurer in most all cases believes it is dealing with his/her insurer when in actuality the claimant is dealing with the reinsurer under the disguise of the insurer and/or using the alleged insurer's parties names.