Insurer At Risk - High Bond Yield

The life insurance industry is at risk if there is a sharp rise in bond yields, with an extreme situation potentially causing insurers to liquidate investments reaching $1 trillion in the United States and Europe, the International Monetary Fund warned on Tuesday.

Vulnerabilities have increased for life insurers, the IMF said in its Global Financial Stability Report , noting the industry is at the “center of fixed income markets” owning about 20% of global bonds and 30% of credit investments. Life insurers have long-dated liabilities and are a critical source of demand for bonds with long maturities.

A stress scenario of a large and sudden increase in bond yields and corporate spreads could induce mark-to-market losses of 30 percent for insurers in some jurisdictions - pointing to US and UK insurers particularly sensitive. This could lead to the emergence of policy surrenders, forcing life insurers to liquidate investments, which, in the extreme, could reach $1 trillion in the United States and Europe.

Rising rates could cause problems for a range of financial institutions as well as life insurers. Rising rates could generate mark-to-market losses (for insurers) but that’s also true for other investors.

Bond yields have been rising as inflationary concerns have increased. The benchmark 10-year Treasury is close to a 4-month high. Life insurers with “longer durations and a greater share of riskier corporate bonds in their portfolios would be hit the hardest by a sudden increase in yields.

A severe scenario of a sudden spike in yields could lead to policy surrenders. A scenario of bond yields increasing 200 basis points or more—similar to the worst-case yield increase and wider corporate stress scenario—could be associated with a significant increase in lapse rates.

Insurance Company Denies Accident Claim

An insurance company has been ordered to compensate a man more than a million yuan (US$155,200) after he accidentally ran over his two-year-old son. The man, surnamed Wu, ran over his son who was playing beside the vehicle when he was backing out near his home in August, 2020. The boy suffered brain damage in the traffic accident and subsequently died in hospital.

Wu failed to follow safe driving specifications and should bear the full responsibility of the accident, the police ruled. Wu and his wife asked their insurance company for compensation of 1.38 million yuan, because the car owned by Wu's wife was covered by their policy.

The insurance company refused and said the accident was beyond the coverage of either the mandatory liability insurance for traffic accident or commercial insurance. The company said the accident did not happen on a public road and the parents failed to look after their son.

The Qingpu court said the insurance company should take responsibility to compensate according to their agreement with the couple. The accident happened mainly because of the vehicle and the wrong operation of Wu. The negligence of the couple partially led to the outcome.

The insurance company should take 80 percent of the responsibility and compensate a total of 1.11 million yuan. The judge said no insurance fraud was involved because the victim was the son of the driver, and the accident has been analyzed as a traffic accident.

NBA Players - Insurance Fraud

More than a dozen former NBA players have been charged in New York federal court in an alleged multi-million-dollar health insurance fraud scheme to rip off the league's benefit plan. 
The 18 former players named in the indictment include alleged scheme ringleader Terrence Williams, selected 11th overall in the 2009 NBA draft by the then-New Jersey Nets, six-time NBA All-Defensive Team member Tony Allen, former Lakers Guard Shannon Brown and Ronald Glen Davis, who played for the Bolton Celtics, Orlando Magic and Los Angeles Clippers over the course of his career. Allen's wife, Desiree Allen, is the only woman charged in the indictment.

Those indicted face charges of conspiracy to commit health care and wire fraud as well as aggravated identity theft. By late morning, 16 of them were in custody after arrests in a dozen locations nationwide.

According to the grand jury indictment, the defendants allegedly engaged in a widespread scheme from at least 2017 up to around 2020 to defraud the NBA Players' Health and Welfare Benefit Plan by submitting fake reimbursement claims for medical and dental services that were never actually rendered. In some cases, the players who submitted the alleged false claims weren't even in the United States at the times they allegedly received the treatments. They allegedly filed fake invoices saying they had to pay for the phantom procedures out of pocket. Those allegedly fraudulent claims totaled about $3.9 million, from which the defendants got about $2.5 million in fraudulent proceeds.

Williams allegedly orchestrated the years-long scheme and recruited other NBA health plan participants to assist by offering them fake invoices to support their claims. He allegedly received at least $230,000 in kickback payments from 10 other players in return for providing the alleged false documentation.

The 34-year-old Williams also allegedly helped three co-defendants -- Davis, Charles Watson Jr. and Antoine Wright -- obtain fake letters of medical necessity to justify some of the services on which the false invoices were based. Williams also allegedly impersonated an individual who processed plan claims at one point in furtherance of his alleged scheme.

Among the false reimbursement claims described in the indictment is a $19,000 claim that Williams filed for chiropractic services he allegedly never had and for which he received $7,672.55 in reimbursement. Williams also allegedly obtained a template for a fake invoice designed to appear as if it had been issued by the office.

Fake chiropractic treatment invoices were allegedly also created for Davis, Watson Jr. and Wright and emailed to Williams. The template had the date, invoice number, services and a charge of $15,000 filled in but left the "bill to" box, where the name of the patient would ordinarily be found, blank.

Williams is accused of emailing those fake invoices to the other defendants named in the indictment. He and defendant Alan Anderson, who briefly played for the Nets from 2013 to 2015, allegedly helped get fake letters of medical necessity for Davis, Watson Jr. and Wright in furtherance of the fraud scheme as well.

Several of the fake invoices and medical necessity forms stood out because, “they are not on letterhead, they contain unusual formatting, they have grammatical errors” and were sent on the same dates from different offices.

In another example, Manhattan U.S. Attorney Audrey Strauss told a news conference, defendant Gregory Smith submitted paperwork for a root canal in Beverly Hills, when he was in fact playing basketball in Taiwan at that time. Others submitted false root canal paperwork as well.

Some of the players were told to repay the money they received from the NBA’s health plan once it was determined that the claims were false. Some did, while others didn’t, according to court documents.

Also named in the indictment: Brooklyn-born Sebastian Telfair, who played for a half-dozen NBA teams including the Cleveland Cavaliers, Clippers, Celtics and Minnesota Timberwolves and Darius Miles, drafted third overall by the Clippers in the 2000 NBA draft and a first-team NBA All-Rookie player.

Prosecutors are seeking "any and all property, real or personal, that constitutes or is derived, directly or indirectly" from the alleged fraud in restitution. If any of that property can't be acquired for whatever reason, the U.S. government says it will seek forfeiture of any other property of the defendants up to the same value.

Medical Insurance Fraud - China

A national operation targeting medical insurance fraud has seen 251 criminal groups dismantled and 3,819 suspects detained in six months. 

By the end of September, medical insurance funds totaling approximately 230 million yuan (about 35.6 million U.S. dollars) had been retrieved during the operation that was jointly launched by the MPS, the National Healthcare Security Administration (NHSA) and the National Health Commission on April 9. 

In the first eight months of 2021, the NHSA also handed punishments to approximately 212,500 of the 516,600 medical institutions it inspected, and retrieved 8.8 billion yuan. Police will step up efforts to combat medical insurance fraud, and will welcome the public to offer information.

Selling Insurance Yo The Dead

An insurance agent in Odisha, India, was arrested for allegedly providing life insurance for four people who were already dead by the time the policies were taken out.

Kabiraj Behera took out 23 policies from Life Insurance Corporation of India (LIC) and placed them in the names of four people who had died between 2013 and 2019. The total value of the policies was INR18.1 million (SG$326,000).

Behera had been an agent for LIC since 2003, but is believed to have first committed the offences in 2013. Behera would place the insurance in the dead person’s name then wait three to four years before forging a death certificate in order to claim the death benefit.

Investigations revealed that despite the insured persons being dead, the premiums for the policies were being regularly paid. Behera kept the insured amount per policy below INR1 million, which meant that the claim will need to be approved only by LIC’s branch manager without being escalated to the divisional office.

The police believe that the ghost insureds’ beneficiaries were in on the scam. A search of Behera’s residence revealed evidence such as voter identity cards and bank passbooks of the dead individuals, as well as correspondences made by the LIC with the beneficiaries.

Police are also investigating whether any other LIC officials acted as accomplices for the fraudulent operation.

Cigna Sells Life And A&H To Chubb

Cigna will sell its life, accident and supplemental benefits businesses to Chubb for $5.75 billion in cash. The businesses, which are located across seven countries, will allow Cigna to focus on its healthcare businesses. Cigna in recent years has been adding more health and prescription benefits and medical care provider operations to compliment its commercial health insurance business, growing government-subsidized offerings such as Medicare Advantage plans and individual health insurance such as Obamacare.

Cigna, which bought the pharmacy benefit manager Express Scripts 3 years ago, has a big business administering coverage for large self-insured employers and is also packaging an array of medical, pharmacy and behavioral health benefits for employers large and small. In addition, Gigna's Evernorth healthcare services busibess is growing and the company is looking to expand that as a way to compete with rival health insurers like UnitedHealth Group, which owns the Optum health services business, and CVS Health, which owns the national drugstore chain more than 1,000 MinuteClinics and the third largest health insurer in Aetna.

Cigna’s deal with Chubb is expected to be completed in 2022, “subject to applicable regulatory approvals and customary closing conditions. Once the transaction is completed, Chubb will acquire Cigna's “life, accident and supplemental benefits businesses in Hong Kong, Indonesia, Korea, New Zealand, Taiwan and Thailand as well as Cigna's interest in a joint venture in Turkey.” And in Korea, Chubb will “acquire and plans to continue to operate the business under the LINA Korea (Life Insurance Company of North America Korea) brand. 

Cigna will continue to operate international health businesses for “the globally mobile population, as well as local market services in the Middle East, Europe, Hong Kong, Singapore and its joint ventures in Australia, China and India.

Founder Life Insurance - Restructuring

Ping An Insurance Group Co. is considering a sale of Founder Group’s life insurance business, people familiar with the matter said, in what would be the first disposal after the latter’s court-led restructuring.

The Chinese insurance giant is working with financial advisers on the potential sale, which could value Founder’s life insurance unit at as much as $1 billion. Other insurers and investment funds have shown preliminary interest in acquiring the business. Considerations are at an early stage and no final decision has been made. 

The new company was created following the restructuring of Peking University Founder Group Corp., the troubled business arm of a top Chinese university. Its assets include Founder Securities Co., Founder Technology Group Corp. and China Hi-Tech Group Co.

In July, a Chinese court approved a restructuring plan in which a consortium including Ping An and Zhuhai Huafa Group Co. agreed to invest 53.7 billion yuan ($8.3 billion) to 73.3 billion yuan into the company. Earlier this year Ping An said it would buy a 51.1% to 70% stake in Founder Group for as much as 50.75 billion yuan.