ACA Assurance (in Rehabilitation)
FREQUENTLY ASKED QUESTIONS
October 2008
What has happened to ACA?
ACA Assurance, a Manchester, New Hampshire-based fraternal benefit society, was placed into rehabilitation on September 8, 2008. This rehabilitation is conducted under the authority of the Merrimack County (New Hampshire) Superior Court. New Hampshire Insurance Commissioner Roger Sevigny is the court-appointed Rehabilitator.
Why are my benefits being reduced?
Due to recent operating losses, there is not enough money to pay expenses and policyholder claims, so ACA must increase the availability of capital and surplus funds. As a fraternal benefit society, ACA relies on premiums from its members as its principal source of money.
Generally, when a fraternal benefit society is unable to pay claims, it must either reduce its benefits (value of the insurance coverage) or obtain additional funding by requiring its members to make special payments to the fraternal in addition to their insurance premiums. This is called an “assessment”; anyone who has enrolled in an insurance benefit offered by the fraternal is a member of the fraternal and can be assessed for the financial shortfall.
Who has authorized or approved the assessment by ACA Assurance?
The assessment has been authorized by the Board of Directors of ACA, the Merrimack County (NH) Superior Court, and the New Hampshire Insurance Commissioner as the Court-appointed Rehabilitator of ACA.
Is it legal to reduce my benefits or require me to make additional payments?
ACA is a fraternal benefit society domiciled in New Hampshire. This means that New Hampshire’s laws apply to coverage offered by ACA. Both New Hampshire law and ACA’s By-laws allow an assessment. The reduction in benefits was approved by a New Hampshire court.
If I have a “life insurance” or “preneed life insurance” policy, what can I expect ACA to pay upon my death?
The current approved ACA action means that your policy’s value has been reduced by approximately 25%. In other words, while the “assessment” is in place, ACA will pay 75% of the amount of the face value of any death claim.
What is the effect of the assessment on my annuity?
The face value of your annuity will be reduced by 25%. The amount of any periodic payment you receive will also likely be reduced by 25%. Note that as of October 24, 2008, tax deferred annuities had not been assessed.
Can I “surrender” my policy? In other words, can I turn in my policy and in exchange for a reduced value?
No. Currently there is a moratorium in place on the surrender of policies and on new policy loans.
Are there any alternatives to an assessment? For instance, if I turn in my policy will I get my money back? Can I take a loan against the policy?
There is currently a moratorium on surrenders and policy loans, so turning in your policy is not an option. If and when policy surrenders are permitted again, there will likely be an assessment just like the 25% reduction in value applicable to claims. In other words, if your policy has accrued a Cash Surrender Value and surrender is allowed in the future, and you decide to cash in your policy, any applicable assessment amount will be deducted from your Cash Surrender Value. For example, if the cash surrender value of your policy is $2000 and a 25% reduction in value is still in effect, you would not receive $2000. Instead, you would receive $1500.
How long will this last?
This assessment will remain in place indefinitely. It is up to the court-appointed Rehabilitator to decide if and when to lift the restrictions.
What will the dividend or interest rate on my policy be during the period of the assessment?
The dividend rate for pre-need policies has been set at zero since 2006 by ACA’s Board of Directors. As to other dividend or interest rates, you should contact ACA at 800-222-8577. For annuities, it is anticipated that the assessment will apply to both current and prior accrued interest and principal.
How much money do I need to pay to ACA for the assessment?
There is nothing additional you are required to pay currently. Instead, the assessment (25% reduction in value and benefits) has been applied to all claims, annuity distributions, loans, or policy surrenders.
I live in Maine and have an ACA insurance policy. What is the Role of Maine’s Bureau of Insurance (BOI)?
Generally, it is important to remember that a fraternal is not subject to the same solvency protections as traditional insurers and there is no guaranty fund that pays claims when a fraternal becomes insolvent. In this case, because ACA is not domiciled in Maine, BOI’s authority is limited.
BOI is working with the New Hampshire Department of Insurance and the Rehabilitator. Maine enrollees should contact BOI at 1800-300-5000 for assistance. Translator service is available.
BOI will provide information on the Bureau of Insurance Website as additional information from the courts of New Hampshire, ACA, or the Rehabilitator becomes available.
What if ACA continues to have financial problems?
The New Hampshire Insurance Commissioner (court appointed Rehabilitator) will decide whether liquidation is necessary. In other words, it may be necessary to require ACA to go out of business. If ACA is liquidated, then the New Hampshire Insurance Commissioner (Rehabilitator) will be responsible for cancelling insurance policies and other financial obligations, to terminate the Company’s affairs and business.
How can I get additional information?
Additional information from ACA and New Hampshire’s Insurance Department:
http://www.aca-assurance.org/English/index.htm
http://www.aca-assurance.org/downloads/assessment_letter.pdf
http://www.nh.gov/insurance/media/pr/documents/pr_092508.pdf
http://www.nh.gov/insurance/legal/rehabs/insurance_legal_rehabs_aca.htm
ACA has additional information on its website,
http://www.aca-assurance.org. It has also established a special call center at 1-800-222-8577.
