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Episode #2122
Guidelines for Insurance
Lewis: There are many forms of insurance out there; some you need and some you may not. What do you need to know about insurance to better insure your financial future? We'll talk about it next on Black Issues Forum.
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Lewis: Hello, everyone and welcome to Black Issues Forum. I'm Mitchell Lewis. Many of us have heard the expression, "One paycheck away from poverty." But how could a medical emergency or a geographic disaster affect your financial security? There are many forms of insurance to help citizens guard against having the rug pulled out from under them. At the same time there are some forms of insurance that might be draining too much from your monthly paycheck. Where is the balance? Today we'll help you sort through some of these questions and issues to insure your future. To help us through the quagmire, I'd like to welcome Commissioner Jim Long, the six terms commissioner of insurance for the state of North Carolina. He is also a past president of the National Association of Insurance Commissioners, a regulatory organization that helps protect consumer interests. Also with us is James Speed Jr., the President and Chief Executive Officer of North Carolina Mutual Life Insurance Company. And, gentlemen, to both of you, welcome to Black Issues Forum.
Long: Thanks, Mitchell. It's always good to see you, sir.
Lewis: Mr. Speed, I will start off with you. Give our audience a brief history about North Carolina Mutual.
Speed: First of all, Mitch, North Carolina Mutual has a rich history. We got started in 1989. Today we are the oldest and the largest African American owned insurance company in the country. We got started in 1898 when no one else would insure African Americans for their lives. So John Merritt, Dr. Aaron Moore started what is known as North Carolina Mutual today along with five other gentlemen, one being Dr. James B. Shepard who assisted in starting North Carolina Central in 1910. But several of these individuals were also instrumental in the organization of Mechanics & Farmers Bank, Mutual Community Savings as we know it today, and then also had some influence on Lincoln Hospital. So not only was there a financial institution or a financial giant it also provided tremendous benefit to the community at large. Today we not only sell individual insurance but we also provide group insurance to some of the large corporations throughout America.
Lewis: Commissioner Long, actually the North Carolina Department of Insurance started a year after North Carolina Mutual. What is the role of your department?
Long: Well, you are right. We did start shortly after the NC Mutual Company was formed up and worked with them for the 106 years since then. The role of our insurance department, Mitchell, is to first of all safeguard the citizens of North Carolina and make sure the 1,400 insurance companies writing business here are licensed properly, have financial resources to pay all the claims when they come in, that they treat the policy holders right. We approve the policy form so we know what they are selling out there and edit that and audit that to make sure they are doing it right. If you have a problem with a claim we come in and try to help resolve that. We can't resolve them all; we know that. But we try to do that. But we-probably the premium business in North Carolina a couple years ago, last time we had the numbers, was $29 billion of premiums. So insurance is a big business in North Carolina. There are something like over 100,000 insurance agents. So it is a very big business. It's a very needed business for our citizens.
Lewis: Mr. Speed, as you look over the 100-plus year history of North Carolina Mutual, it seems like insurance for African Americans has changed over the years. Talk about how has it evolved?
Speed: Well, as I mentioned earlier we did get started almost 100 years ago. And for many of those years we basically sold our insurance policies through our captive [ph] agency force. And we sold it basically door to door. So those older African Americans I should say, those African Americans like myself who may be over 50, they remember an agent coming to their homes, collecting money on a weekly basis for their insurance. It also back during that time, they were doing segregation. So most of the African Americans lived in a centralized area and the insurance agent was as prominent as maybe your teacher or your preacher. So everyone knew about North Carolina Mutual. Today it's not the case because everyone doesn't live in the same neighborhoods today. We don't sell insurance the same way even though it's sold face-to-face. The collection efforts today are done through bank drafts or mail pay. So because you don't see that agent in the neighborhood some people are wondering is North Carolina Mutual still around? And I will inform them we are still around, alive and well.
Lewis: Commissioner Long, you have been commissioner for six terms. As you look through the evolution of insurance here in North Carolina, what do you see as some of your concerns?
Long: I think the concern we have, Mitchell, is to get the word out to the public, to your viewers today, for example, that if you are buying insurance first of all make sure it is a reputable company, licensed to write insurance in North Carolina. You can call us on that. You can go to our website and find out are they in good stead with us? Secondly, is that agent licensed to write in North Carolina? We are having more and more fraud problems particularly in the health insurance area and in Worker's Comp, too, where you have these bogus companies in there taking your money. They are not there to pay the claims. So we have seen that change. We have a better educated agency force out there. It used to be, this was before James and I got into it, that the agent came in, took an exam, there are 20 questions. They never changed the questions. They memorized 20 answers because somebody would give them the answer sheet. But nowadays you have to go to class for 40 hours before you take the exam and then you take the exam, you have to go to class every year to keep up to date on the changes. Life insurance is changing all the time, as James will tell you from the standpoint of NC Mutual Life. And so you have to keep the agency force up to date on the new trends out there. And as James was talking about, the interesting trend is it's no longer door to door sales on life insurance. You do have the agent doing face-to-face and talking to you. "You know, Mr. Lewis, we think you need so-and-so." But you don't have them come by to collect the premiums. So it makes it more efficient process now with the bank transfers or you can write a check or a credit card. So that makes it easier and they can pout more money into the reserves which then takes care of the needs of the insurers when they die which is what life insurance is all about is when you pass away.
Lewis: Mr. Speed, tell me about some of the myths that it seems like people still have about insurance especially even trust factor when it comes to that. What are some of the myths?
Speed: Well, I think one of the myths I would say particularly for an African American insurance company, I think that one of the myths is that because we are an African American insurance company that our premiums tend to be higher. And I think that we have very competitive products. We also have a very competitive premium and that I think is one of the big myths. The other myth I think is that insurance agents can't be trusted. And I will tell you that the people that we hire and employ are people who are very upstanding in their communities. They are deacons in their churches, they are leaders in different organizations so one of the criteria that we use in recruiting our agents are those people who do those kinds of things, have a presence in those communities and people that we also trust. And we do background checks on all of our agents to make sure that they are people that are upstanding in their communities and would do the right things because people will buy insurance from those people that they trust first of all. Or those individuals that have been referred to them from either family members or friends. So we have to make sure that we have reputable agents.
Long: I'd add on to that, too, that in the case of NC Mutual they are going to look at that agent to make sure that they are trustworthy because that agent represents the company. If the agent starts doing the premium, it's the company that is on the hook for it. We hold the companies responsible so I commend Mr. Speed on that, too, because he knows that he has got that responsibility to his potential clients out there and they take it very seriously.
Lewis: Are there any guidelines that folks should look at especially when purchasing insurance?
Long: Well, I guess first of all, do you need insurance? Auto liability insurance is state mandates you buy that. Physical damage coverage, you don't have to buy that on your vehicle unless you owe money to the bank. They are going t require it. But if you can't replace it out of whatever you have in savings, yeah, you ought to buy that, too. Homeowner's insurance, if you have a bank loan as most folks do, they are going to require to buy the homeowner's insurance. Or if you are renting a place you ought to buy renter's insurance because that then covers your personal property, the TV set and the stereo and the furniture in the living room, the bedroom, whatever. So you need to buy that, too. Life insurance, do you need to buy it? Think about it. Single person, maybe not. Well, you may want to have a policy to take care of the burial expenses unseals you have a lot of money in savings. But if you are married or you are married and have a family, even as a young person, you need to think about that because the purpose of life insurance is not for me. It's for my family, to take care of those family expenses, to educate the children if I am gone or take care of the salary, the gap that the family would suffer if I die. And that is the purpose of life insurance is to take care of those that you leave behind. So it is very important. And we are trying to educate the young people, too. It is important to you. You may want to buy that new truck or car or whatever but you need to think about those family obligations and buy that life insurance, too, and health insurance. That is the big issue now. You are not mandated to buy health insurance. If your employer does not furnish that a large percentage of people in this country do not have health insurance and we all end up paying for that and it is very expensive to go the emergency room when you have the flu or something when you can go to a family doctor.
Speed: I'd like to add one comment to that, Mitchell, because one of the things that we realize is that most of the consumers don't know what they need when it comes to insurance. So one of the things that North Carolina Mutual has done to help the community at large, we've started a financial literacy program that we have the second Tuesday at 6:30 every month. And it covers a wide variety of topics that relate to not only insurance but also your taxes, also college funding. How to buy a home for the first time, how to do a budget, how to do a financial statement. Your banking relationships, your credit. And we have basically subject matter experts that cover each one of these areas. And the whole attempt is not to sell insurance but to have a more informed consumer as it relates to financial products.
Long: I am going to inject. I didn't realize you had that. That's great because these kids coming out of high school these days don't know about balancing checkbooks, don't know about cell phone usage when the bill gets really bad and big and dad pays for it. And credit cards where you can run up __ debt. So that is great to get that education level out there because they don't get it in school these days.
Speed: We've been doing that for about a year and half.
Long: That's wonderful.
Lewis: Now where does the program take place? And why type of participation level have you been receiving?
Speed: Well, it takes place at North Carolina Mutual in Durham at our corporate headquarters. Participation has not been as good as we would like because we though initially if we would provide this kind of service and it would be free that everyone would come. And I would say that today we are probably getting maybe 10% of what we expected. Our average audience is about 25 people. It has been increasing as we have been marketing the program a little better. But we would really like to see the room full because we think that this is something that really will help create wealth in the African American community because part of it-and not only the African American community but the community at large because we feel like this is one way that we can assist in helping to build wealth.
Lewis: I want to talk to you about something, Commissioner Long touched on earlier dealing with health insurance and especially the under-insured because statistics show especially in the United States about 46 million Americans are without health insurance. And over half of those folks are African American or other minorities. What can be done to try and bring these people into the fold and have health insurance coverage that is affordable?
Speed: Well, I think when you look from an employer standpoint one of the things that a lot of employers are-I should say most employers are doing today-is basically shifting some of that cost to the employee with the hope that we as consumers of healthcare will be smarter consumers. The bigger issue is for those people who are in the transition from job to job or who don't have a job and who can't afford the insurance. And how do we provide insurance for those individuals of which I think it is our obligation to do that as a society, if you will, but what happens there is the other costs to those who pay increases. I think this is a major issue along with Social Security and some of the other national issues that we have to address long term.
Lewis: Commissioner Long, when you look at the state level, are there any type of programs being created or is there anything in place to try and help these folks?
Long: Mitchell, there are several initiatives going on right now. The Institute of Medicine, which studies these issues on the health side particularly, has already released the report trying to deal with it. You've had the Democratic Party with a task force there, which in fact my wife chaired. You've got the legislative committees where they had seven different committees looking at health issues. One of the things in the General Assembly which is in session now is looking at a high risk pool for those who because of background and health problems, with heart attack, stroke, whatever it may be, __ somebody you don't want to write insurance for but they need coverage somewhere because we all end up paying for that. They go to the emergency room. They go to the hospital and it is uncompensated care. So that is one thing and that would be paid for by subsidy that each of us pays $2 a month to take care of those bills. We are looking at some reforms in small group health act trying to make it better so the companies will come back into the marketplace. We are looking at the so-called New York Plan, the Healthy New York, where we are looking at that. Other issues there we are trying to put together. So the General Assembly is looking at a whole lot of issues dealing with health insurance and we have got to do something about it. The state, this country is coming to a crisis mode right now. This country has got the best healthcare in the world. We've got the most expensive healthcare in the world and we got to figure out how to pay for all that. And the rising cost in pharmaceuticals, the rising cost of going to the physician or the hospital or anything else out there, driving all those, plus the aging population. If you look at the state health plan, which I don't have responsibility for but you are in it as I am in it. You see the dependent coverage going up every year. And that is why so many of our younger state employees won't buy the family coverage because they can't afford it on the salaries they are being paid. So you and I get it as a state employee but you are not going to buy it for the family because you can't afford it. So there is a large block of uninsured right there that we got to take care of.
Lewis: Put you on the spot a little bit because I know that some people would probably question. You said that we have the best healthcare here in the country and there are some people who are talking about going off to Canada and other places and Mexico and other places. What makes it, what makes healthcare here in the US better than some of those areas?
Long: Well, we've been more advanced on it than a lot of countries have been. They have taken some of the discoveries that we have had and we got UNC, we got Duke Hospital right in this area here and Wake and all the others around here. So they are very advanced on what they are doing. They are doing remote surgery now. East Carolina perfected that some years ago. So you got all those techniques out there but it is costing us a whole lot for this technology we are getting to so we are trying to stay ahead of the curve. My wife's got a cousin in Ireland who had a major miracle about three years ago. She waited four years to get cataract surgery. She can read the finest print you can show her. She's 98. But she had to wait three years to get the cataract surgery. Here you can go get it tomorrow. But you pay for it. And that is the problem. How do we pay for all this? And Medicare is not going to be able to pay for it much longer. That is the problem. Medicaid is not going to be able to pay for it. I'm glad you young people are working because I am already on Social Security and Medicare and I want all of you still working. We need the money.
Speed: I need the __.
Lewis: Speaking of young people, there is going to come a point especially with having elderly parents and having that care for them, Mr. Speed, what is available? Can folks like start early to try and prepare for having to take care of folks in the latter years or themselves for that matter?
Speed: Yes. You are probably of long term care. That is a product that has come on the scene of late that provides benefits to those people who need nursing home or long term care. The fact of the matter is that as we continue to live longer, there is going to be a need for to take care of our parents. So we will need that kind of benefits for our parents. But also as you have indicated, Mitch, we will probably need that ourselves because again, as we live longer, we are going to-it's going to be inevitable that during our lifetime we will need some form of long term care. So long terms care products is something that could address that issue.
Long: And that is a good point, too, because if you look at the numbers, if you are go in a skilled nursing facility it could run as much as $70 thousand a year. And it used to be you could do all that with Medicaid but now you got to spend down so much and most people don't have that kind of reserve to take care of it. Is it fair to go back to your children and expect them to pay for it? I don't know. So we highly suggest you go ahead and look at long term care insurance. And the sooner you buy it, the less the price is going to be. If you wait until you are in your 70s or 80s, they are not going to sell it to you anyway much less you be able to afford it. So buy it early. And pay the premium and get ready.
Speed: And as you know the additional burden that you have there, if you don't have the long term care and you are in those latter years and we don't have sufficient Social Security and we are already under-saved so we don't have the necessary savings and we don't have the necessary savings, we don't' have the necessary Social Security, your lifestyle and what you thought would be prosperous years in your later years could be sort of disastrous.
Lewis: And of course, looking at the latter years, some people depend on their job pensions and Social Security to tide them through the senior years. Are there other types of financial strategies folks should be looking at?
Speed: Well, I would say one, the way I look at retirement and these are some of my personal views, when I look at retirement it is basically like a three-legged stool if you will. You know, you have your pension, or I should say your Social Security. Then you have your retirement from your job that provides you two forms of income. And what you are seeing of late, or I should say the last 20 years have been the 401k and IRAs. It is very important for us particularly in those early years to start funding these IRAs and 401k's. Particularly when you have an employer that matches you because one of the things that we are also seeing as I talked about, one of those legs of that stool was a pension plan. There was a time when all companies had something called a defined benefit plan where the company provided your retirement benefit and told you, "This is what you will get when you retire." Those plans are going away and becoming and moving more towards a defined contribution plan, which are those plans like the 401k. So please fund those 401k's because that is going to be the third leg of that stool that I think you are going to need to have a very good retirement-a comfortable retirement.
Long: Excellent point there. The savings rate in this country is on a negative basis right now. It is not savings we are putting aside that we needed to as they do in Asia and as they do in Europe. And if you don't save it yourself, your kids probably can't take care of you. They got to worry about their, your grandchildren and getting them educated. So you got to be responsible for yourself because you can no longer count on Social Security and Medicare and Medicaid so you got to take that responsibility and maybe you don't need that new car every two or three years. You need to put some money aside. You can do some tax sheltering, you can do in some of these products out there now and it is an excellent way of doing it.
Speed: I think that is why the financial literacy is so important, Mitch, because when you think about all of these factors that a person has to deal with, well, you need to save some money, you need to fund your 401k's, the healthcare is increasing, you know, where do I find all of this money to do these other things I need to do? And that is why the financial literacy is so important because it helps you build those skills to be able to deal with those kids of questions.
Long: You know, in the way, way back days, I don't guess you guess are old enough to remember this but every county had a county home. And when you got really old and decrepit and ran out of money, they put you in the county home. It's like a nursing home but the county paid for it. We don't even have that anymore. So you got to take care of yourself on all these things. You need to be planning ahead for it.
Lewis: Commissioner Long, now you are also affiliated with a program called Insure You. Tell us what that program is about.
Long: That's a program we developed through our National Association of Insurance Commissioners trying to educate the public all over the country so you understand about life insurance and health insurance and automobile insurance and homeowner's insurance. It helps you to get educated. It's the same idea that James was talking about that NC Mutual is putting on a seminar at their place. But we can do it online. You go to insure you-I forgot the website. We'll get it for you but to let you do your own education. You can also do the same thing with our website at the department, ncdoi.net and go on there and see all these different things. Find out if that insurance company is licensed to do business, get some suggestions. We are talking about right now, we are now into the hurricane season, what do you do to get ready? We could have major hurricanes in North Carolina as we have had in year's past. So what do you do to get ready on that? If you want to talk about insurance issues make sure you got those insurance policies in a waterproof container and take them with you when you have to evacuate your home because of floods. Otherwise, you are going to lose them and it is a lot easier to get those claims paid, life insurance, health insurance, homeowners, whatever, if you got the policies with you.
Lewis: And I understand that is insureyouonline.net.
Long: Correct.
Lewis: .org.
Long: .org. Excuse me. You're right on that one, too.
Lewis: And we are coming down to about our last few minutes. And Mr. Speed, I will ask you, especially for young people starting out, and I know there is no specific formula, but what should they be considering especially when they think of their financial future and how insurance can help along? What should they be thinking?
Speed: Well, I think for a young person getting started normally that young person, if they get a job they will be insured by their employer. And I would basically say even though you are insured by the employer it is the appropriate time for that young person to go ahead and get some additional life insurance outside of their employer because that is the time that they are going to their healthiest. They will be more insurable and so the time to do it. And also the big factor is that their premiums are going to be lower. So the time to do it is when you are younger versus waiting until six or seven years when maybe you are no longer employed by that employer or you got laid off and now you have no coverage and your health situation could have changed over that period of time and when you now try to go get life insurance, you may not be insurable. So the best time to do it is when you are very young.
Long: And one other point on that. James makes good points. But you got whole life to look at which has a saving feature on that. You might want to consider that when you are young and it costs more because you are putting some of that money aside in savings or term life which may have a-you can afford a higher limit on that because it doesn't have a savings feature. So you need to look at that and talk to your life insurance agent and they will give some recommendations and then follow up and do a little research and decide what is best for you and what is best for your family.
Speed: And if I could add one more point to that if we have the time. If you are a young person with a family, you need as much protection as you possibly can get and in those cases term insurance would be more appropriate because it gives you more protection particularly if you have two young people who have small kids. Both are earners and if something happened to one of those wage earners it puts a tremendous burden on that family when you don't have one of those wage earners. So that piece of protection. But as you move along in your life cycle,. The whole life would also provide cash value as the commissioner has indicated that can even be used for policy loans or even helping to educate your kids.
Lewis: And we'll have to stop it here. James Speed, President and CEO of North Carolina Mutual and Commissioner Jim Long of North Carolina Department of Insurance, thank you so very much for being with us. And if you would like to get in touch with our guests or obtain a copy or transcript of this show, visit us online at unctv.org/bif. When you visit be sure to give us your comments and program suggestions. You can also call us on the bifline at 919-549-7167. For Black Issue Forum, I am Mitchell Lewis. Thanks for watching.
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