AIG in financial crisis, will this effect my Workers’ Compensation benefits under the Defense Base Act? September 15, 2008Posted by Aaron Walter in Uncategorized.
Tags: AIG, workers comp benefits
On news of a potential downgrading of its debt rating, AIG’s stock fell 31% Friday and another 50% as of lunch time on Monday September 15. AIG has asked the U.S. Federal Reserve Bank to help raise $40 billion to avoid such a downgrading and is attempting to sell off its domestic automobile businesses and aircraft leasing business.
AIG insurers approximately 90% of Defense Base Act Workers’ Compensation claims. The questions we have been asked several times today are – will this effect my weekly benefits? Will AIG keep paying my doctors?
The answer is that there should not be any immediate disruption in these benefits. It appears that AIG should have enough cash to continue to pay claims. In fact, the division handling these claims has made record profits for AIG over the past few years.
Long term, this could produce some changes. I don’t mean even more denials of coverage, as that would only result in increased penalties, attorneys fees, and man hours, but rather a potential reduction in personnel. A reduction in adjusters would negatively affect those on Workers’ Comp benefits under the DBA in that you could have less adjusters spending less time reviewing claims. At this point this is all speculation, but this is certainly something to keep an eye on over the coming weeks and months.
UPDATE: It looks like the State of New York may be stepping in to help AIG as well. Apparently the State will authorize AIG to borrow from its own funds to cover AIG’s operating needs.
9/16 UPDATE: Here is a short CNN Money article on how this affects even non-customers – Five Questions, Why AIG Matters To You
9/17 UPDATE: AIG stock fell yet another 30% this morning (44% as of 11:18 AM EST)and buzz on Wall Street is that the Federal Government, in an unprecedented move, may essentially buy an 80% share in AIG in exchange for a whoping $85 billion loan.
The Fed’s loan doesn’t require asset salesor the company’s liquidation, though these are the most likely ways AIG will repay the Fed, central bank staff officials told reporters on condition of anonymity. Blackstone Group LP advised AIG on the transaction.
That should certainly float the company along, but it doesn’t sound like good news for current stockholders.