To: All NASCOE Members:

From: James L. Mace, CEO, J. M. Marketing

Date: November 11, 2004

Subject: Status of Central States of Omaha (CSO) Insurance Company and its Cancer policy:

As you know, over the past year I have been communicating with you about my grave concerns with Central States of Omaha’s situation and potential premium rate increases through mailings, faxes, telephone contacts and personal visits by my agents to your offices.

You may remember communications I sent out last year advising all NASCOE members that CSO had lost a major class action law-suit involving their cancer product and were planning what I feared would be a series of rate increases.

At that time I began recommending that all policy holders who were eligible consider moving to the American Heritage/Allstate Cancer policy that was approved by the NASCOE Benefits Committee. Since not all policy holders are able to move to the new AHL policy due to a pre-existing condition, such as being less than 5 years free of cancer treatment, or over 65 years of age, at my request CSO agreed to allow those policy holders to move to another, lower cost option within their company without penalty. I feel this is a good option if they cannot take the American Heritage one at this time.

· In January, 2004, we saw a significant rate increase and then in July CSO informed me that they were in the process of filing rate adjustments of 120% in all states. Not every state has approved this amount. The rate approved varies somewhat from state to state. The lowest increase is 70%, most states so far have approved the 120%. We do not know at this time what it will be for 2006 or beyond. My opinion is that CSO is not able to guess, much less project that at this time.

· On November 10th, 2004, I was informed by a senior officer at CSO, Central States of Omaha, that they are no longer marketing their Cancer or ICU policies. As of January 31, 2005, they will no longer accept any new business in those products, although they will continue to service all existing policies including claims. They are hoping to sell this entire block of business, which their actuarial review has determined to be undesirable for them to market or hold, to another insurance company. They have scheduled a press release about this the week of November 15th. The Wall Street Journal should be covering it.

· CSO is a sound financial company and is NOT going out of business. They are simply changing their business structure to handle insurance products that provide an acceptable return of investment to their investors. Unfortunately, providing an acceptable return of investment to their stockholders on their Cancer product in the situation that they currently find themselves, involves pricing themselves out of the market. I am informed that they will continue to offer Credit Life insurance to banks, which I understand currently accounts for about 80% of their total corporate business.

I have mentioned before how important Cancer and ICU insurance is to my own family. My wife and I, both cancer survivors free of treatment for over 5 years, have moved our whole family to the new American Heritage/Allstate policy.

I have been in the insurance business for over 25 years and have been working to bring good, affordable supplemental insurance products to NASCOE members for 16 years. During this time I have come to feel that the FSA “family” is my own also.

My personal goal for you, as for my own family, is to have the best insurance products available at the current time, at the most affordable cost. Like all businesses, the insurance market place continues to change. As it does, I endeavor to analyze your insurance needs and the available products for the best possible match at any time.

Please call our office (800-330-6223) if you have questions, or if you still have the older CSO (CO9) Cancer policy. I appreciate your business and your confidence.

 

<Back to Cancer Section