What if they admitted guilt and were found guilty?

Sixty minutes had a piece last night how the states were going after life insurance companies for knowing people were dead, but not contacting beneficiaries to pay out the policies. They would check social security master death files, stop paying things such as annuities and pensions, but wouldn't do anything to pay obligations. They would drain the accounts with cash values paying premiums for people they knew were dead, etc. The total value insurance companies would have paid totals many billions going back decades.

So the states get settlements from all the big boys, but none admit guilt or wrongdoing. So the question is, what would it mean if the states insisted they admitted guilt and wrongdoing? Consequences?

I can't say the exact order of events, but it would end with 7 figure bonuses for the ceo's =p

Well, making the very dubious assumption that charges would actually be filed, the insurance companies would be sued, a judge would find them liable, and there was an actual collectible judgment imposed:

The insurance companies would use the same strategy that saved the big banks in 2008/2009: the "too big to fail" argument. They might settle claims (for pennies on the dollar), but would never admit wrongdoing, as that would expose them to criminal charges. Also, if they admitted wrongdoing, they could be sued by individuals (or their estates) who were defrauded, independently of any state actions (the state cannot file a class action suit that supersedes individual rights for redress).

The rationale would be that a settlement that destroys an insurance company is in no one's interest. An insurance company could only pay claims on a small fraction of its policies before it went broke, much as a bank could only pay out 20% of its depositors' money before it became insolvent. A state-sponsored prosecution and an admittance of wrongdoing would be very much like a run on a bank--and the result would be, as in a bank run, that many customers would lose out. People would have their policies essentially cease to exist. Any annuities or term life policies would be null and void.

So the "too big to fail" argument would actually have some merit, and would no doubt be invoked in the process of some back-room deal. The little guy, getting screwed all the time, basically never gets compensated for it. It's the American (Trump!!!) way.

I could be wrong. Let me start there.

But I think the issue is damages. If the insurance companies admit wrongdoing, then they open themselves up to lawsuits for punitive and compensatory damages, which can be multiples of what they actually owed the beneficiaries.

It also sets a precedent for anybody else to come along, even if they've made a previous agreement with the insurance company about receiving a payout, to show that the company willfully cheated them somehow, and file additional claims.

Where's the WOV legal department (Mr.V?) when you need it? :-)

Maybe this is why premiums are low.

Quote: jjjoooggg

Maybe this is why premiums are low.

You are right. One of the companies not settling, Kemper, said having to pay out would have to change how they do business. They just hadn't planned on paying them.

Kind of always angered me seeing these insurance companies do things like claim 600 year old sunken treasures as theirs. Yeah right like they've been solvent for centuries, not to mention the validity of the claim and them owning them could be dubious.