Jefferson City, Mo. - A judge has placed a St. Louis-based insurance company into rehabilitation and turned it over to regulators at the Missouri Department of Insurance. Department Director John M. Huff has been named receiver of National States Insurance Co., which allows the department to take over operations of the company. Huff says National States is in hazardous financial condition, and the action is necessary to protect Missouri consumers who have long-term care, life and Medicare Supplement insurance policies with the company. The company’s board of directors has consented to the rehabilitation order.
Rehabilitation is a legal step taken by the Court to protect policyholders by preserving the company’s assets. The Department as the Rehabilitator assumes management of the company, attempts to correct existing problems, continues operations, maintains policyholder accounting and develops a plan of rehabilitation or petitions the Court for liquidation. The department is currently overseeing thirteen insurance companies in rehabilitation or receivership status.
National States is licensed to do business in 37 states, including Florida, where it has run into financial problems with its long-term care policies. Huff says the company underpriced its products, and as a result may be unable to pay future long-term care insurance claims filed by policyholders.
With a rehabilitation, the department's priority will be to process existing claims and find another insurance company willing to buy and assume the policies of National States.
As with all licensed insurers in Missouri, National States’ policies are backed by the Missouri Insurance Guaranty Association. Much as the FDIC insures bank deposits in the event of a bank failure, the Guaranty Association backs the policies of insurance companies so that policyholders are protected after a failure.
"Putting National States into rehabilitation will allow our department to make sure the company’s assets are handled properly, so that claims are paid as fully as possible," said Huff. "The department and the Guaranty Associations in the states in which the company conducts business will work together on behalf of consumers, who have faithfully paid their premiums to this company for years."
National States had $6.4 million in premium sales in Missouri in 2009. Policyholders with questions can call the Missouri Department of Insurance Consumer Hotline at 800-726-7390 or contact the department online at insurance.mo.gov. A list of Frequently Asked Questions pertaining to this rehabilitation may also be found on the department’s Web site.
I have heard that National States Insurance Co. is going into bankruptcy or being taken over by the state of Missouri. Is this true?
National States is not going through bankruptcy, but a "rehabilitation." On April 1, 2010, the Circuit Court of Cole County, Missouri, issued an order of rehabilitation against National States Insurance Co. and appointed the Director of the Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP) to be its Rehabilitator. The rehabilitation order was consented to by the Board of Directors of National States Insurance Co.
Although it is too soon to know the exact financial condition of National States, this action was taken as a result of the company’s deteriorating financial condition and to protect the interests of the company’s policyholders.
The Rehabilitator will assume the management of the company, attempt to correct existing problems, and continue its operations. The rehabilitation will analyze the company’s financial position for the purposes of determining the steps needed to best protect the policyholders of the company.
What is rehabilitation and how does it work?
Rehabilitation is a legal step taken by the court to protect policyholders by preserving the company’s assets.
The DIFP director petitions the circuit court for approval to rehabilitate the company. If the court approves the request, the director is named the Rehabilitator and:
- Assumes management of the company
- Attempts to correct existing problems
- Continues operations
- Maintains policyholder accounting
- Develops a plan of rehabilitation or petitions the court for liquidation.
How does the Rehabilitator accomplish this?
A company in rehabilitation meets its obligations by:
- Maintaining premium flow from the existing policyholders
- Managing assets, including the sale of those assets, if appropriate
- Seeking a company with which to merge, as appropriate, and/or
- Seeking a business partner to strengthen the company through capital investments, as appropriate
How did this happen to National States Insurance Co.?
Many factors can impact on the financial stability and solvency of a company. It would be unwise and unfair to speculate as to the reasons for National States’ financial status until the Rehabilitator has the opportunity to review the financial position of the company. However, many long-term care companies are experiencing similar financial woes resulting from the cost of claims being greater than was originally priced when the products were sold.
What lines of coverage did National States offer?
National States offered primarily long-term care and Medicare supplement policies. In addition, the company wrote life insurance and accident and health insurance policies.
In how many states did National States sell policies?
Its 2009 annual report and other official documents indicate National States sold policies or had licenses to sell them in 37 states.
What will happen after the financial analysis of the company’s financial condition is completed?
If the analysis indicates that the company can be successfully rehabilitated, a rehabilitation plan will be presented to the circuit court for approval.
Otherwise, the Director will petition the circuit court for a liquidation order. If the order is entered, the Director will become the liquidator of National States. The liquidator will collect the assets of National States and distribute them, according to a statutory priority scheme. Most of National States’ policies were guaranteed renewable life policies that will be transferred to the appropriate state guaranty fund which will pay the claim up to the fund’s statutory limit.
Most state guaranty associations have a $100,000 or $300,000 policy limit. Missouri has a limit of $300,000 for life policies and $100,000 for most other policies, such as long-term care. Click here to get a detailed listing of your guaranty association’s coverage limits.
Who do I call if I have questions concerning the rehabilitation?
Questions from policyholders concerning claims should be referred to the appropriate National States’ claims office or representative as was done in the usual course of business. The toll-free number for National States Insurance Co. is 800-868-6788, option 5 for claims.
National States Insurance Co. contact information
Phone: 314-878-0101 / 800-868-6788
Fax: 314-878-8118
Web: http://www.nstates.com or
http://www.nstates.com/faq.asp for frequently asked questions
Postal address: 1830 Craig Park Court - Suite 100, St. Louis, MO 63146
Inquiries from policyholders regarding non-claims matters, such as premium payments and policy endorsements should be referred to the appropriate National States department as outlined in your policy. Questions from all other parties regarding the rehabilitation should be referred to the appropriate company representatives.
If management or employees of National States receive any inquiries from the media regarding rehabilitation, do not comment and refer the inquirer to the Insurance Department’s Communications Office at 573-751-2562. Any calls concerning regulatory matters, such as license status or regulatory filings should be referred to DIFP’s Division of Insurance Company Regulation at 573-751-4362.
All other questions concerning the rehabilitations should be referred to the DIFP’s Receivership Section at 573-522-6115.
How does rehabilitation affect my pending or open claim?
The rehabilitator has decided that for now National States’ claims for policy benefits will continue to be processed and paid in the normal course of business. If there is any change in the future, you will be notified.
Claims for bad faith or other extra-contractual damages will not be paid.
Claims of other insurance companies under reinsurance agreements and claims by other insurance companies directly against National States will be deferred and addressed through the rehabilitation process.
Do I need to do anything to get my claim paid or to keep receiving my payments?
While National States is in rehabilitation, policyholders do not need to take any special action or file anything special at this time with respect to their current pending or open claim. Policyholders should continue to deal with, cooperate with and communicate with National States in the same manner that they have in the past.
What if I have a new claim? Can I submit it to National States?
Yes. Follow the provisions in your policy that explain how to file your claim.
Will policies be canceled?
The Rehabilitator will honor the policy you purchased from National States Insurance Co. Guaranteed renewable policies will not be canceled. No other policy cancellations are being considered at this time. Remember, however, that if you do not pay your premium as it becomes due, your policy will be canceled. You MUST pay your premiums to continue the policy.
Should policyholders continue to pay premiums?
Yes. Payment of premiums as they become due will preserve coverage. If you fail to pay your premiums, then your policy will be canceled.
How will rehabilitation affect employees of National States?
Staff from the DIFP will meet with National States employees to address this specific issue. Further information will be provided to employees as it becomes available through your human resources staff.
Will National States continue to write new business?
No. National States stopped accepting new business effective with the above referenced court order on April 1, 2010.
Will agent commissions be paid?
Commission payments will continue for now. During the Rehabilitator’s analysis of National States’ operations, the continuation of commission payments will be reviewed.
My company provided goods and services to National States Insurance Co. before the rehabilitation order was issued. Will we get paid?
Generally, payments of all vendor bills for services rendered prior to April 1, 2010, are suspended. Contact the department within National States that you typically deal with for guidelines on what can be paid for goods and services provided prior to April 1, 2010.
How can a vendor to National States Insurance Co. be certain that its bills for goods and services provided after the April 1, 2010, rehabilitation order is entered will be paid?
All expenses incurred after April 1, 2010 and authorized by the Rehabilitator are considered administration expenses under the rehabilitation order. They are given the highest priority of payment by law.
I am involved in a lawsuit with National States. What impact does the rehabilitation order have on me?
A stay order, issued within the rehabilitation order, was entered by the Circuit Court of Cole County, Missouri, and restrains any litigation against the rehabilitator for 90 days from the entry of the order.