Indiana-based Benicorp Insurance Co. will liquidate under an order filed late last week by a circuit judge.
The company’s remaining assets will be sold to generate money, and guaranty associations in several states will help cover its leftover claims, according to the Indiana Department of Insurance.
Benicorp provides mostly group health insurance. Last year, it reported a $9 million loss. The company sank into financial trouble mainly because it was “significantly underpricing” its health coverage, said Connie Ridinger, the insurance department’s chief financial examiner.
Indiana regulators took control of Benicorp in August. The Indianapolis-based insurer had 52,000 policyholders, including 21,000 in Indiana, and licenses to operate in 28 states.
This spring, the insurance department had ordered Benicorp’s parent company, McKee Heritage Holding Corp. of Arlington Heights, Ill., to pump $14 million into the business to cover existing claims.
But state regulators found $20 million in uncovered claims when they took over. The company has since processed more than 38,000 claims.
The liquidation order, entered by Marion Circuit Judge Theodore Sosin, declared Benicorp insolvent.
The insurer will stay in business to process the remaining claims, said Randy Lamberjack of Noble Consulting Services Inc., who will oversee the liquidation.
Those claims will be paid through an agreement with the National Organization of Life and Health Insurance Guaranty Associations. Insurers contribute money to these associations, which then act as a safety net to protect consumers against insolvent companies, Indiana Insurance Commissioner Jim Atterholt said.
Guaranty associations in each state will cover the Benicorp claims generated within their boundaries. The state associations have caps ranging from $100,000 to $500,000 on individual claims. But customers should not be left with unpaid claims, Ridinger said.
More than 80 percent of Benicorp’s policyholders have moved to other health insurance plans.
Ridinger said it’s been several years since an Indiana insurance company faced a liquidation order.
“We try really, really hard to work with companies to prevent this from happening,” he said.
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