life insurance advice News

Sun, 19 August 2007
MBF To List On ASX
MBF Australia said it intends to demutualise and list on the Australian stock exchange in an attempt to grow and diversify its business. The health insurer said its plans have been endorsed by the MBF Council. It said a share market listing is likely in calendar 2008. The board believes that demutualising is in the best interests of policyholders, that it will maximise MBF's future growth potential and enhance its ability to compete in a rapidly changing environment," chairman John Conde said.

Mon, 24 September 2007
Size doesn't matter
REMEMBER the Wallis Inquiry into Australia's financial system? Headed by then prominent businessman Stan Wallis, it was announced by Treasurer Peter Costello in May 1996, and reported to him in March 1997, just over 10 years ago. Costello said he commissioned the inquiry because of the significant and rapid changes occurring in the financial system. However, there was one change he wasn't prepared to contemplate. At the time a hot issue was what was then known as the "Six-Pillars Policy". There was a blanket ban on mergers among the major banks and two largest life insurance companies -- AMP and National Mutual. Wallis said that the threat of takeover was an important source of competitive pressure, and recommended an end to the six-pillars policy. He also recommended that foreign investment rules applied to the finance sector should be the same as those applied in any other sector of the Australian economy. No part of the finance system should be immune from foreign takeover, including the big four banks and the two biggest life companies. However, he also said that a large-scale transfer of ownership to foreign hands would reduce Australia's future policy flexibility and would be contrary to the national interest. Source: The Australian

Mon, 12 November 2007
Size doesn't matter
REMEMBER the Wallis Inquiry into Australia's financial system? Headed by then prominent businessman Stan Wallis, it was announced by Treasurer Peter Costello in May 1996, and reported to him in March 1997, just over 10 years ago. Costello said he commissioned the inquiry because of the significant and rapid changes occurring in the financial system. However, there was one change he wasn't prepared to contemplate. At the time a hot issue was what was then known as the "Six-Pillars Policy". There was a blanket ban on mergers among the major banks and two largest life insurance companies -- AMP and National Mutual. Wallis said that the threat of takeover was an important source of competitive pressure, and recommended an end to the six-pillars policy. He also recommended that foreign investment rules applied to the finance sector should be the same as those applied in any other sector of the Australian economy. No part of the finance system should be immune from foreign takeover, including the big four banks and the two biggest life companies. However, he also said that a large-scale transfer of ownership to foreign hands would reduce Australia's future policy flexibility and would be contrary to the national interest. Source: The Australian

Mon, 12 November 2007
Avoiding the pitfalls of death and taxes
COUPLES, home buyers and holidaymakers do it. Those facing surgery do it. Yet we should all do it. Solicitors reckon fewer than one-third of us have written a will, with big life-changing events - and the prospect of dying - among the few things that shake us into action. What makes it hard is working out who in the family will inherit a particular asset or family heirloom. By and large, death does not trigger an immediate tax hit on those who receive - the beneficiaries. Your wealth passes to them tax-free, for which they will be truly grateful, until they come to sell at some future date. As a rule of thumb when selling, assets handed down are not taxed where they were not subject to tax in the first place, such as the family home - the deceased's primary place of residence - and any assets bought before the start of capital gains tax in September 1985. Almost any asset acquired after that, such as an investment property or holiday home, is taxable when sold. "If they were taxable in the hands of the original owner - the deceased - then they will be taxable when sold by whoever has inherited," KPMG tax director Ross Stephens says. "Think here of a share portfolio, managed funds, works of art and other collectables." A handful of assets is immediately liable for tax on death, such as bonds and foreign currency, payable in the deceased's final tax return. For those inheriting, the base for calculating future tax on these assets is the market value at the date of death. Source: The Australian

Mon, 19 November 2007
'Crazy John' was refused life cover
MOBILE phone king John Ilhan recently had an application for life insurance rejected by one of the nation's biggest companies. An insurance industry source said last night he did not know if another company wrote a policy on the life of Mr Ilhan, who collapsed and died in a park near his Melbourne home in suburban Brighton on Tuesday. But the source confirmed that one firm had knocked him back. Aged just 42, Mr Ilhan is understood to have been a heavy smoker who was in the process of quitting over the past 12 months. Crazy John's managing director Brendan Fleiter denied Mr Ilhan was a fitness fanatic. Although there was a gymnasium in the $17 million mansion the family built five years ago, Mr Ilhan did not make daily use of it. "He was working on his fitness and getting there, but with 20-20 hindsight we can all do better," Mr Fleiter said. "He certainly looked good on the outside, and he was a top-class soccer player in his youth, so to that extent he was fit and healthy." A memorial service for Mr Ilhan will be held in Melbourne on November 12, while the traditional Muslim funeral will be held at the Broadmeadows mosque at midday tomorrow. Members of the Turkish community - where Mr Ilhan was still known by his traditional name of Mustafa - are expected to be joined by business leaders and sportsmen at the mosque where Mr Ilhan's father was a founding president. Source: The Australian

Mon, 19 November 2007
Sony spin-off in $3bn float
SONY Financial Holdings, Japan's biggest IPO of the year and the first substantial one since the August turmoil, lists on the Tokyo Stock Exchange today - accompanied by quite a few sighs of relief. Sony Corp's show of nerve in pushing on with book-building for the float of its biggest non-core business a fortnight after the meltdown has been rewarded with a respectable take-up. Sony was obliged to downgrade its indicative price from Y415,000 per share to Y380,000-Y400,000 but came away with a price at the top of its range. That will raise about Y320 billion ($3 billion). The float gives SFH an initial market valuation of Y870 billion, with Sony retaining a 60 per cent interest. It will add about Y78 billion to Sony's pre-tax earnings for the year, or almost a fifth of the group's projected Y420 billion pre-tax earnings. SFH is the biggest Japanese IPO since the reconstructed Aozora Bank was floated a year ago. SFH's activities are concentrated in domestic life insurance - a tough and unglamorous business in the worst-performed share-market sector this year. Source: The Australian

Mon, 10 December 2007
Families urged to take up pet insurance
People hardly give a second thought to insuring their homes, cars, themselves and families, but regularly forget their pets. That omission can often prove disastrous if the animal gets sick, and not just financially for the pet owner. Given costs of up to $2000 for major surgery - the cuddly cat or loyal labrador could find themselves turfed out of home - abandoned after years of unconditional love - due to prohibitively expensive treatment. The answer, veterinarians say, is pet insurance. Although the industry is only small in Australia, it is well established in Europe, where almost half of Swedish pet owners and 20 per cent of British ones have policies for their household animals. RSPCA Victoria president doctor Hugh Wirth urged people to protect themselves against their pets needing serious medical attention. "That's exactly why the RSPCA has long supported pet insurance," doctor Wirth said. "If you can't afford to pay for annual vaccinations, annual worming ... then frankly you shouldn't have a pet at all. "People nowadays insure their cars, insure their houses against devastating accidents ... we're just simply saying it's just as expensive to fix a pet." Source: The Age

Mon, 10 December 2007
Farmer killed wife 'for insurance'
There was strong evidence to suggest a man killed his wife to use her $100,000 life insurance to solve his farm debts, a court has heard. Dairy farmer Graeme King, 56, is on trial in the Victorian Supreme Court after pleading not guilty to murdering his wife Nancy Kaye King. Mrs King was found face down in a water-filled pit on her family's dairy farm at Tallygaroopna, near Shepparton, on June 25, 1991. In his closing argument today, crown prosecutor Colin Hillman SC said King was in serious financial trouble at the time of his wife's death. Mr Hillman said this was highlighted by retired bank manager Thomas Gannon's evidence he met with the Kings on the morning of Mrs King's death about their money problems - a meeting King denied happened. "That is very strong evidence that there were real financial problems which of course could be solved by the death of Nancy King, which would result in $100,000 life insurance coming through her will to Graeme King," Mr Hillman said. Source: The Age

Mon, 10 December 2007
'Dead' canoeist's wife arrested
THE wife of a man who "returned from the dead" after apparently being lost at sea in a canoeing accident five years ago was arrested on her return to Britain from America, police said. Anne Darwin, 55, was arrested on suspicion of fraud after arriving at Manchester airport on a flight from Atlanta. She was then taken to Cleveland Police Station where her husband John was charged on Saturday with deception. "She is being given a medical examination and then there will be a period of rest," a police spokeswoman said. "We don't know whether interviews will take place this evening or start tomorrow." Darwin reported her 57-year-old husband missing in 2002 when he failed to return home after canoeing in the North Sea near their home in Hartlepool, northeast England. A few weeks later the shattered remains of his red kayak were discovered. A coroner declared Darwin dead in 2003 after a police inquiry. Newspaper reports said Anne Darwin had cashed in her husband's life insurance policy and received his work benefits after he was declared dead. Source: The Australian

Mon, 07 January 2008
Big Plans for China's Life Insurance Market
Foreign firms' share of the overall insurance market is expected to hit 10% by 2010, according to a recent PricewaterhouseCoopers study. China's life insurance sector is becoming crowded. Just seven years ago there were no more than a dozen companies active in the market. At the end of 2006, this had risen to 46, over half of them foreign joint ventures. At least 10 more foreign names are likely to be added to this list over the next three years, according to the majority of overseas insurers interviewed for a recent PricewaterhouseCoopers (PwC) survey. A similar number of respondents said they expect the foreign firms' share of the overall insurance market to hit 10% by 2010. Last year, this share stood at 5.9% in the life sector and 1.2% in the property and casualty sector. "Some companies are projecting premium growth of 200-300% in 2007 thanks to the wider geographical market, the wider range of products and the opening of new branches," said David Campbell, PwC's Asia Pacific insurance practice leader. Source: BusinessWeek

Mon, 07 January 2008
Finance should top new year resolutions
Almost half of all Australians have no insurance and close to a third are worried about their financial future, a new survey reveals. The Citibank research also showed little more than one-fifth of the population had enough savings to sustain them beyond three months if they lost a job. Citibank's sales and wealth management head, Cameron McLeod, said Australians needed greater saving discipline. "Figure out where your 'financial weaknesses' are - whether it's an inability to control your debts, failure to stick to a savings plan, or failure to make your money work harder for you," he said. "I'd urge Aussies not to bury their heads in the sand, but to make 2008 the year to get ahead." Source: The Age

Mon, 21 January 2008
Holocaust Insurance Case Inches Closer to Settlement
A federal judge on Monday cleared the way for a long-running dispute over unpaid life insurance claims for Holocaust victims to move a step closer to a settlement. But opponents said they would keep trying to block the settlement, which, they argued, would benefit only a small number of those with potential claims. The settlement would provide perhaps $50 million to Holocaust victims and their families — $35 million has already been paid — with some people receiving payments as small as $1,000. Though insurers have paid claims, opponents say that most of the hundreds of thousands of policyholders have received nothing and that billions of dollars are at stake. By early last year, lawsuits against about 20 European insurance companies had been dropped or settled in a dispute that began more than a decade ago. And lawyers for some policyholders and the last of the companies, Assicurazioni Generali of Italy, said they were ready to settle. In February, Judge George B. Daniels of Federal District Court in Manhattan approved the settlement. But a three-judge panel of the United States Court of Appeals for the Second Circuit agreed with Samuel J. Dubbin, a Miami lawyer leading the opposition, that many people with a potential interest had not been sufficiently notified of the pending settlement. In court Monday, Judge Daniels said that by sending out more than 50,000 letters late last year, lawyers backing the settlement had overcome the objections, and he reaffirmed his earlier finding that the settlement was fair. The case now returns to the appeals court. Source: The New York Times

Mon, 21 January 2008
Putting a Price on the Priceless: One Life
ASSIGNING a dollar value to a person's life might seem impossible, not to mention unthinkable. But after a wrongful death, the needs of the surviving family - financial, emotional or both - often lead to that grim calculation. Forensic economists advise courts and governments on how to translate lives cut short into money for the living. "It's terribly distressing to anyone who gets involved with it," said Don Frankenfeld, a South Dakota forensic economist who helped determine compensation for Sept. 11 victims. "It's a scary, ghoulish kind of arithmetic." Six years after the attacks, experts are still being asked to calculate the value of lives lost. There were 95 lawsuits by survivors bypassing the official compensation fund in favor of the courts. About half of them have settled; 41 cases are pending, including some concerning injuries. They are set to go to trial in federal court on Sept. 24. Source: The New York Times

Mon, 10 March 2008
Thai dogs to get life insurance
THAI dogs are now eligible for life insurance, under a new policy that offers payouts to owners if their pets die, a veterinarian said today. About 2,000 dogs have already been granted life insurance policies since the program began last year, veterinarian Sombat Pipattanamatha said. Locally bred dogs can receive coverage worth up to 10,000 baht ($A344), while foreign pedigrees can get up to 500,000 baht ($A17,000), he said. "Dogs are now like family members, and we think they should be well cared for,'' Sombat said. Sombat, who consults with the company that developed the policy, said he is now working on plans that would provide benefits to dogs in non-fatal accidents and that would cover injuries to humans in dog attacks. Pet insurance is available in other countries, but the idea of providing high-end services to animals is gaining popularity in Thailand as the growing middle class spends more on dogs with fancy pedigrees. Source: The Australian

Mon, 28 April 2008
Woman killed homeless for life insurance
A 77-YEAR-OLD woman was found guilty of killing two homeless men to pocket millions of dollars in life insurance that she and an alleged accomplice had taken out on the victims. After a four-week trial, Helen Golay was convicted by a Los Angeles jury of two counts each of murder and conspiracy in the killings of Paul Vados, 73, in 1999 and Kenneth McDavid, 50, in 2005. Local media dubbed Golay and her alleged accomplice, Olga Rutterschmidt, 75, the "Black Widows" following charges that they had taken out life insurance on the two men before they were run over by a car and killed. The jury found found Rutterschmidt guilty of one of the conspiracy charges, but the panel of 12 was still deliberating on the other three charges. Prosecutors have not sought the death penalty against either of the defendants, but they face life in prison without the possibility of parole if convicted of murder. The two women, who have been friends for more than 20 years, were arrested in May 2006. Source: Courier Mail

Mon, 28 April 2008
Rio Tinto (RIO) $146.60
IF there wasn't a $180 billion merger at stake, the strident interchange between Rio's Tom Albanese and BHP's Marius Kloppers would be no more than an entertaining sideshow. Tower Australia (TAL) $2.69 IN recent years, risk insurance such as life and income protection has rated as the poor-cousin alternative to sexier superannuation. But attitudes are changing. According to research house Dexx&R, risk business is expected to grow faster than super over the next nine years, for two reasons. First, financial planners have taken to flogging risk cover because the share market slump has eroded interest in equity- linked products. That way, they can't be embarrassed when the market tanks. There's also some evidence that record personal debt levels and job insecurity are driving life insurance sales. Second, super growth will be tempered by the growth in the over-60s population, who will be drawing down their super rather than adding to their nest eggs. Dexx&R expects in-force risk business to grow from $5.88 billion now to $19.36 billion by 2017. "This underlines the attractive fundamentals of the new-look life insurance industry and explains why players such as Axa Asia Pacific, Macquarie Bank and BankWest have renewed their focus on the sector in recent times," says broker EL&C Baillieu. Tower is the only ASX-listed company to derive more than 50 per cent of earnings from life insurance and is the fourth biggest operator in this sector. Tower shares have gained 5 per cent over the last six months while the overall financial services sector (including property trusts) has slumped 27 per cent. Tower stock enjoyed a 10 per cent romp on Wednesday but retreated yesterday. "We believe the sharp share price gains are tied to speculation that Tower could be subject to a takeover bid from a major financial services house," Baillieu says. The firm has no inside info, but notes Tower's fast-growing life book would be a "snug addition" for any number of companies. Major shareholder Guinness Peat Group, which holds a 29 per cent stake has been buying, but not so much in recent days. Tower chief Jim Minto for years has banged on about the high level of underinsurance among our working populace. Human nature being as it is, people will upgrade their TV before they make such boring purchases. But the game changes when financial planners actively flog the products. We last had Tower as a long-term buy at $2.55 on November 28 last year. Baillieu has downgraded the stock from a buy to a hold, only because it needs a nap. That sounds right, but we'll maintain our call ahead of Tower's May 29 interim result. Source: The Age

Mon, 28 April 2008
Insure your unborn baby
EXPECTANT mothers will be able to insure their unborn babies against pregnancy complications, birth defects and even death. Mothers whose children have disabilities such as blindness and deafness or other congenital malformations, including spina bifida, Down syndrome, cleft palate and heart disorders, will receive $50,000 from an insurance policy launched this week. Women suffering dangerous complications such as ectopic pregnancy or eclampsia will also get a $50,000 lump sum, while stillbirths qualify for a $10,000 payout. The baby cover available from insurance giant ING is the first of its kind in Australia, possibly the world, and will be aimed at the nation's growing number of older mothers. Australia's median age for new mums is almost 31, up from 27 in 1985. The older the mother, the greater the risk of pregnancy complications and birth defects. A 25-year-old woman has a one in 1400 chance of delivering a baby with Down syndrome and one in 500 chance of having a live born baby with a chromosomal abnormality. The risk for both rises to one in 60 for a 40-year-old. For women 35 or over, the risk of having a stillbirth is one in 440, compared to one in 1000 for younger women. ING spokesman Mark Vilo said: "Effective life insurance needs to keep pace with social trends and advances in medical technology." The baby policy, an optional extra in ING's top life insurance, will be available to women aged between 16 and 40. There is a 12-month waiting period and the cover ends on the child's second birthday. Premiums rise with age. A 32-year-old professional non-smoker earning $80,000 a year would pay an annual life premium of about $1443.26, including the $439 baby option. A 40-year-old woman would pay double that total. Mr Vilo said the policy payouts could be used to cover medical expenses, adjustments to the home, mortgage repayments, to replace salary or wages, pay for a carer for the child or cover funeral costs if the child died. "Every woman in the process of having a child knows the risks," he said. "We don't make people undergo genetic testing to find out things they don't want to." NSW Midwives Association secretary Dr Hannah Dahlen said: "It is making women think about the terrible things that can happen when the reality is there are very few mothers who suffer from complications during pregnancy. "Insurance companies are going to go wherever they can to make a buck. Fifty thousand dollars is not going to go very far in caring for a sick child. It is marketing fear and uncertainty when women are vulnerable during pregnancy." Source: The Age

Mon, 08 September 2008
Japan's Dai-ichi buys GPG stake in Tower Australia
JAPAN'S Dai-ichi Mutual Life Insurance Company today bought a 29.7 per cent stake in insurer Tower Australia for around $376 million from investment company Guinness Peat Group. London-headquartered GPG said it was selling the stake in three tranches, with the first 14.9 per cent stake disposed unconditionally at a price of $3.75 a share. A 5 per cent tranche will be sold subject to regulatory approval at the same price. And the remaining 9.8 per cent is to be sold after obtaining approval from regulators and shareholders. Tower Australia said Dai-ichi Life would consider supporting expansion initiatives and strategic investments. The Japanese group will also participate in Tower Australia's dividend reinvestment plan over the next three years. If Tower Australia shareholders approve the transaction, Dai-ichi Life will be invited to nominate two directors to join the board, replacing the GPG nominees. "We are delighted to welcome Dai-ichi Life as a cornerstone shareholder in Tower Australia," Tower Australia chairman Rob Thomas said. Source: The Australian

Tue, 07 October 2008
5 Mistakes That Can Ruin Your Life (Insurance)
There are many good reasons to consider buying a life insurance policy, such as a recent marriage, a new baby, or a large debt purchase (like a mortgage) that loved ones would have trouble paying if something happened to you. Or, perhaps you have witnessed first-hand the impact a death has on a surviving family's finances. If you're in the market for life insurance or have recently bought a policy, make sure you don't put your family's finances in jeopardy by making these mistakes. Mistake No.1 - Waiting to Buy Insurance Regardless of the reason, it's important to take action as soon as you feel a policy is required. Life insurance rates generally increase as people age or their health deteriorates. And, in some cases, illnesses or health problems may make you ineligible for coverage. The longer you put off the buying decision the more the insurance will probably cost - if you can buy it at all. Mistake No.2 - Buying the Cheapest Policy While it is important to shop for a policy that's priced in line with the rest of the marketplace, that should not be the sole consideration in your decision-making process. Life insurance policies can be a bit complicated, so it's a good idea to learn about policy features and benefits. Many people mistakenly believe that price is the only differentiator for term life insurance. However, there are important policy provisions that you should investigate before going with the lowest price. Most term policies are "convertible," meaning they may be exchanged for a permanent type of life insurance policy at a later date regardless of your future health. Some policies also offer more generous conversion privileges than others. Get an understanding of how long the conversion option is available; the most generous conversion privileges are available for as long as you pay term policy premiums or to a specific age, such as 70. Also, make sure to find out if there are any restrictions on the type of policy available for purchase under the conversion privilege. Some policies offer just one type of permanent policy at conversion, while others offer several. Mistake No.3 - Making Late or Missed Payments If you're considering buying a universal life policy with secondary guarantees - low-premium guaranteed death benefits for life or for a specified period of time - a late payment can have an impact on policy benefits. Universal life is a special type of permanent policy that has been marketed as having long-term guaranteed protection at the lowest possible rate - it is very different from term insurance. While many of these types of policies have cash surrender value, universal life with secondary guarantees focuses on maximizing the amount of insurance available per dollar of premium. Some of these policies can be sensitive to the timing of premium payments. For example, if you happen to miss a monthly payment - or are more than a month late sending in your check - your guaranteed policy may no longer be guaranteed. A policy purchased with guaranteed coverage to age 100 might only provide protection to age 92 if one premium payment is late or missed. Be sure to check with your company if you think you're going to be late on a payment; many will allow 30 to 60 days without changing the policy's guarantee. Article continued at investopedia.com.

Tue, 07 October 2008
Graded Life Insurance
Graded Life Insurance is used to insure people, when they are turned down by an life insurance company because of health reasons. It can also be recommended by an agent, when a person is clearly uninsurable. Sometimes you may be required to live a certain length of time, to enjoy the full death benefit. If you have been turned down for life insurance, you may still be eligible for coverage. Unless you are diagnosed with an illness that is terminal, you probably will qualify for Graded Life Insurance. You will not be required to take a physical. The insurance company will accept your Graded Life application or simply reject it. There is a small catch to purchasing this type of insurance policy. It will cost more than the normal policy that you could buy for the same face amount. However it could be said that Graded Life Insurance should be considered a last resort policy. The policy is also not for those in a nursing home or hospice. Graded Life Insurance could be useful to someone who has three or more health conditions that are not terminal, but are not a good risk for an insurance company. For example a person who is slightly overweight, has high cholesterol, and is a diabetic who takes insulin, probably is a decline from most life insurance companies. However this same person will more than likely qualify for Graded Life Insurance. Source: life-life-insurance.blogspot.com

Tue, 07 October 2008
Life insurance most important policy for consumers
Prudential has conducted research that reveals people would sooner relinquish non-essential goods/services such as mobile phone contracts before surrendering their payment protection or life insurance policies. Recent fears regarding the credit crunch and rising energy and foods costs has led to people looking for ways to cut back, especially given the new worries about the prospect of a recession in the US. According to seven out of ten of those surveyed, the first thing to go would be television subscriptions, followed by mobile phone contracts. Only one in ten would give up their life insurance policy due to a tighter personal budget. Over a third of respondents cited life insurance as their most important policy. The second most important policy, ranked highest by a fifth of people, was income protection. Source: Insurance Daily

Tue, 07 October 2008
Life Search: How to recognise a good life insurance broker
A checklist for spotting a good life insurance broker has been devised by LifeSearch. The independent life insurance and protection specialist said that a good broker should have a dedicated claims desk and be able to say how they will help the customer fight their case if the insurer declines or delays a claim. There should also be hidden benefits available such as care and counseling services. A good broker will record all underwriting and sales telephone calls, which LifeSearch says is "crucial for consumer protection" as it proves the customer gave all the information required. Trust advice should also be given as part of the policy set-up, as this stops the Inland Revenue from holding back the policy when inheritance tax bills are paid on the estate of the deceased person. In addition, income protection ought to be recommended over Accident Sickness Unemployment (ASU). The former will pay regularly until the claimant returns to work while ASU covers for only a short period and has a bad claims record. Source: Money News

Tue, 07 October 2008
STOLI on the Rocks
Major life insurance organizations, including the American Council of Life Insurers (ACLI), the Association for Advanced Life Underwriting (AALU) and the National Association of Insurance and Financial Advisors (NAIFA) plan to crack down on companies that pay elderly people to buy life insurance with the intention of selling the policies to investment groups, reports the Insurance News Network. And they're calling for changes in state regulation to help curb the practice. These types of life insurance transactions, called stranger-oriented life insurance, or STOLI, has in the past been a way for policyholders to receive payment for life insurance policies they no longer need. The problem, notes a recent press release from the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA), comes when financial companies seek out people who are insurable but have short life expectancies and who agree ahead of time to sell their policies for a fee. These kinds of transactions have been around since the 1990s, say the NOLHGA, traced back to AIDS patients who had life insurance policies but wanted access to cash funds while they were living. A third party paid the insured person a portion of the face value of the policy, knowing that an AIDS diagnosis at that time meant an early death. The buyer paid the premiums and collected the benefit when the person died. According to a recent press release by the ACLI (viewable here courtesy of the Insurance News Network), The NAIC Viatical Settlement Model Law was enacted in 1993 to govern the sale of life insurance policies by terminally ill policyholders to unrelated third parties. In recent years, however, loopholes in that model were "exploited" by investors and hedge funds to allow STOLI transactions. The ACLI President and CEO Frank Keating called STOLI arrangements "contrived transactions which circumvent the intent of state insurable interest laws." Other industry critics of STOLI say the arrangements do nothing to protect the insured's family or estate. The National Association of Insurance Commissioners (NAIC) also says STOLI undermines the basic premise of life insurance: that a policy's beneficiary has a "legitimate, insurable interest" in the policyholder's good health. Source: insuremeblog.com

Mon, 13 October 2008
Japanese insurer files for bankruptcy
JAPAN'S Yamato Life Insurance will file for bankruptcy protection, becoming the first Japanese insurer to fail amid the global credit crisis, the country's financial watchdog said today. THE credit crunch claimed its first victim among Japan's financial institutions today as hopes faded that Asia's largest economy would be relatively immune to the crisis. Yamato Life Insurance went bust with debts of $US2.7 billion ($3.95 billion), becoming the first Japanese insurer to be brought down by the worldwide financial turmoil, which sent Tokyo stocks plunging more than 10 per cent today. "Because of the global financial market chaos and the credit crunch, the value of our securities holdings rapidly fell. It was beyond our expectations," said the insurer's president, Takeo Nakazono. "We have attempted to strengthen our risk management but we have come to this regrettable outcome," he told a press conference. It is the first Japanese life insurer to fail in seven years, and only the eighth since the end of World War II. The credit crunch has also caused numerous bankruptcies in Japan's crumbling real estate sector. Source: The Australian

Mon, 13 October 2008
Greater world regulatory co-ordination is inevitable
THIS week, in case we needed it, we've been given an unpleasant crash course in how interconnected the global economy is. British savers have to be rescued from potential losses because of the collapse of banks in Iceland. The German Government is forced to offer a multi-trillion-euro guarantee of its entire domestic financial system because of a decision made a few days earlier in Dublin. The inability of borrowers in Nevada to repay their mortgages brings a Japanese life insurer to the brink of bankruptcy. It is this suddenly global dimension to the crisis that has given added urgency to the usually dreary annual meetings in Washington at the weekend of the world's leading finance ministers and central bank governors. Source: The Australian

Mon, 27 October 2008
Sub-prime tsunami finally swamps Asia as equities dive
THIS was the week the credit crisis touched down in east Asia. This was the week economies cushioned by some of the world's largest current account surpluses, owning a large chunk of the foreign exchange reserves, largely unscathed by the initial sub-prime catastrophes, felt the shockwaves pounding into their own financial systems. In most of the major Asian markets, until this week, the challenge had been to ride out the equities markets contagion, panicked liquidations by foreign funds and local institutions and buying strikes by all classes of investors that inevitably flowed from nightly routs on US and European markets. The damage to equities values has been immense; Tokyo, as measured by the Nikkei 225 index, lost 25.4 per cent this week, Hong Kong 19.4 per cent, Singapore 16 per cent and Seoul 12.5 per cent. But for the first time in 15 months it was the potential vulnerabilities of the large Asian economies that came under searching interrogation -- and one indication was severe currency fluctuation. South Korea, the region's fourth-largest economy, staggered under the impact as attention swung to the drastically over-leveraged condition of its large banks and their reliance on now-scarce offshore funding. The Korean won/$US exchange rate fluctuated wildly throughout the week, and again yesterday. After falling as low as W1460/$US yesterday morning, the Korean unit jagged up to W1309 at the close, amidst very strong speculation that the Government was preparing to attack dollar-buying speculators and that the central bank would intervene heavily in the currency market. Finance Minister Kang Man-soo flew to New York yesterday for the IMF and World Bank meetings but his office admitted a more pressing purpose, to ask senior American banking executives for "support in domestic banks' efforts to secure more foreign currency liquidity, such as expanding their credit lines". The People's Bank of China cut key interest rates and flushed liquidity into the commercial banking system this week in sync with 13 other central banks. The Chinese did not say whether, for the first time, they had participated in a co-ordinated international monetary action but the move clearly had domestic stability as well as international implications. It came three weeks after Beijing's first rate cut in six years and the accompanying decision to use a major state holding company, Huijin Investment Corp, to prop up the share values of three major banks. The Bank of Japan did not cut rates this week; with the official rate at 0.5 per cent it has very little leverage in that regard. But the BoJ continued to flush huge volumes of funds into the Tokyo money market -- Y4.5 trillion (about $69 billion) yesterday, for a total Y39 trillion in 18 trading days -- to prevent the interbank market from seizing up, as financial institutions continue liquidating even their safest securities and hoarding the proceeds. Tokyo's confidence problem suddenly got worse yesterday morning with news of the first Japanese financial institution to fail as a direct result of sub-prime related exposure. Yamato Life Insurance, unable to service liabilities of Y269.5billion, filed for bankruptcy protection, a development that caused surprise and dismay because last November the company claimed its total exposure to asset-backed securities was Y1.9 billion. The Japanese financial system has been left relatively unscathed by the sub-prime fiasco -- the Financial Services Agency estimated the total exposure of 672 banks and credit unions at June 30 was Y2.57 trillion, a comparative fleabite -- and the Government insists that will remain the case. "The collapse of Yamato Life is a special case and due to its own weaknesses ... Japan's financial system is stable," insisted Economic and Financial Policy Minister Kaoru Yosano. Source: The Australian

Thu, 18 December 2008
Complaints to banks, financial planners soar in crisis
SEETHING investors and home loan customers are lodging a barrage of complaints against banks and financial planners. The Financial Ombudsman Service has received a massive increase in claims about bad advice as the global meltdown takes its toll. Managed investment disputes before the watchdog soared 152 per cent in just six months. Claims of sloppy financial advice and service were up 55 per cent. "We are seeing a significant increase in disputes in the areas most affected by overall economic conditions,'' investments, life insurance and superannuation Ombudsman Alison Maynard said. "Volatile market conditions and falls in the value of investments will reveal inappropriate advice and highlight service and administration issues.'' A total 739 cases against the investments, life insurance and superannuation sector lobbed i six months. Source: news.com.au

Thu, 18 December 2008
Living longer means working longer
NEXT year marks the 100th anniversary of a big event in Australian social history -- the introduction of the age pension. Turning 65 made you eligible back then, and today the threshold age is exactly the same. Much else has changed, however, in the intervening years. Healthier lifestyles and advances in medical science mean we live about 20 years longer. When the age pension was first introduced, only 5 per cent of the population was older than 65, whereas today 5 per cent is older than 85. Since many retire from work and a regular income around age 60, the challenge is to find a way to fund our health revolution and enjoy two decades of active retirement. Superannuation is not the whole answer and won't be for several decades, until today's 30-somethings reach 60-something. The only real solution is for more people to work longer -- or in the jargon of the economists, improved workforce participation. "We simply will have to keep people in the workforce longer," PricewaterhouseCoopers partner Catherine Nance says. "This will mean changes in workplace attitudes so employers want to keep people on, and people will have to accept that they will need to work longer." As a first step, tax changes are needed "to remove financial disincentives to working longer, and to make it less attractive for people to get out early". A new study by Swiss Re, the world's second biggest life insurer, has found three solutions in financial engineering products -- life annuities, long-term care insurance and reverse mortgages -- although not all are perfectly suited to local use. Life annuities are contracts that guarantee a regular series of fixed payments over a person's lifetime, thus eliminating the risk of individuals outliving their wealth. A related type is a variable annuity that offers retirees various guarantees, yet has payouts tied to the performance of an investment portfolio. Source: The Australian

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