What happens to your policy when your insurance company is sold?
The Hartford recently announced that it will sell its individual life insurance business, and that Forethought Financial Group will purchase its annuity business.
The company has decided to focus on its property and casualty, group benefits and mutual funds businesses.
"The Hartford's sharper focus will lead to an organization that, over time, will be positioned for higher returns on equity, reduced sensitivity to capital markets, a lower cost of capital and increased financial flexibility," Liam McGee, The Hartford's chairman, president and CEO, said in a prepared statement.
What does all this mean for policyholders who have individual life insurance or annuities with the company?
"The Hartford will continue to stand behind all of its contractual obligations and deliver on its promises. All existing contracts remain in force and will be fully supported according to the existing contract terms," says Robert DeMallie, a spokesperson for The Hartford's wealth management division.
The company will continue to write new individual life insurance policies, he adds. "Our distribution and service teams are fully staffed."
Will things change?
"Your policy will not be canceled and your rates will not go up," explains Steven Weisbart, senior vice president and chief economist with the Insurance Information Institute (III). "In any case like this, the state insurance department monitors everything. They will decide if the sell will go forward. They will look out for the policyholders."
Typically, says Weisbart, when a life insurance business is sold, it is bought by a company with an extensive life insurance operation. "The acquirer is likely to be as financially solid as The Hartford. They could be stronger, so you could be better off."
Don't make assumptions
However, don't make assumptions about the acquiring company, or any other insurance companies. Check out a new insurer's ratings and financial status, cautions Robert Hunter, director of insurance for the Consumer Federation of America, a nonprofit association of consumer advocacy groups. Also check out what is being said about the buyer in the press. Go to the company website and see what pops up when you Google it.
Insure.com offers free insurance company ratings from Standard & Poor's.
There is no need to panic, just keep your eyes on the situation. What are your rights? "Those are to be determined. Policyholders should be given ways out without penalty if they do not trust the new deal," says Hunter.
Expect changes. For example, your annuity will get a new investment manager. Hopefully, he or she will have as much if not more investment acumen as your existing manager. While there won't be changes to existing contracts, there could be new underwriting criteria for new customers. Then there's the change in personnel, company culture and computing systems that could raise concerns for some customers.
Do what's best for you
Resist the temptation to immediately leave an insurer when another company purchases it. You don't want to surrender an annuity because there can be early-withdrawal penalties, points out Weisbart.
Similarly, you don't want to just chuck your current life insurance policy. If you apply for a new life insurance policy, realize that because you're older now and possibly less healthy, a new policy will likely cost more.
"Keep aware of the situation," Hunter adds. "Don't trust the insurer to do right by you. Speak out and tell regulators who will have to approve the transaction that you're watching and let them know if you have any concerns."