Executive Life Policyholders Wait, Worry

Some of Executive Life Insurance Co.’s policyholders expressed outrage in the wake of state regulators’ seizure of the troubled firm, but others expressed hope that the action will help protect their investments.

“Am I angry? Of course, I am angry,” said Donn Sigerson, a 77-year-old policyholder, who had been trying to withdraw his funds from Executive Life when the state Insurance Commission sought a court order Thursday to put the company in conservatorship.

“I came in (to surrender a policy) before the regulators took over, and now they are going to hold up my payment. I don’t think anything the Insurance Commissioner has said would indicate to me that my money is safe.”

State Insurance Commissioner John Garamendi said the state took control of the company to preserve its assets for policyholders. He said the company, a subsidiary of First Executive Corp., had been crippled by the deterioration of its huge junk bond portfolio. It has been hurt further in the past week by massive demands for payment by policyholders. Garamendi said policy surrenders are being held in abeyance until a restructuring plan is developed.

Despite the drastic state action, many policyholders were cautiously optimistic that it would improve their chances of recovering all--or at least a substantial portion--of their funds.

“I am encouraged that somebody--a regulator somewhere--is doing something,” said Edmund M. Pease, a Glendale resident whose son is an Executive Life policyholder. “At least the regulators can’t carry off (assets) that haven’t already been taken away.”

Another policyholder said: “I have a lot more faith in the potential of government to do good for people. Hopefully, the state of California will help people out.”

However, many policyholders complained about a void of accurate information. Individuals who called the insurance department’s consumer hot line were often given conflicting and even erroneous reports about Executive Life’s condition and about the safety of consumer funds.

One woman was told that Executive’s policyholders would not be covered by the California Life Insurance Guaranty Assn. But officials with the association said no determination of coverage has yet been made.

If anything, prospects for guaranty fund coverage look brighter than they have in the past, said Deputy Insurance Commissioner Tom Epstein.

The board of the California Life Insurance Guaranty Assn., formed in January to cover a portion of policyholder claims in the event of an insurer’s failure, met yesterday, said Joseph A. Thomas, chairman of the Guaranty Assn.

“There is nothing that I know of that would indicate the guaranty association would not cover Executive Life,” Thomas said. “The application for conservatorship filed yesterday stated that it had not been found to be insolvent or impaired.”

California’s life guaranty fund excludes payments for companies that were insolvent or financially impaired before January, when the fund was formed.

Sigerson is so irritated about his inability to get factual information from regulators that he’s trying to form a policyholder group that would talk to state officials en masse.

“I think we (policyholders) need to have a single voice, so that the commissioner knows how we feel,” Sigerson said. “Divided we have nothing. As an organization, I think we would at least be able to get information more easily.”

* NEW FINANCIAL CRISIS?: Concerns are growing that there is big trouble ahead for the insurance industry. A1