The Lessons Behind Home Beneficial Life Insurance Company

The History

Home Beneficial Life Insurance Company had been one of the few insurance providers that catered to low-income families.  Their area of business had included the District of Columbia and the six Mid-Atlantic states.  For 97 years they had been a very prominent option for individuals needing affordable homeowner insurance.

Things changed in 1997 when American General offered $665 million to the company.  This was quite a steal for them, since they were only earning about $38 million per year. So, they accepted the deal.  Stockholders for both companies became really happy, as the merger made American General’s stock rise by 30 percent.

What Happened to the Customers

Was the merger good for the customers of Home Beneficial Life Insurance Company?  Yes and no.  On the one hand, customers now had access to an insurance provider that possessed a stronger financial backbone.  So, if they needed to file a claim, at least they knew that the company had enough money to process it.  But the bad part is that now customers would have to go by American General’s rules and pricing structure.

The Overall Lesson

What can be learned by what happened to Home Beneficial Life Insurance Company?  Well, from the consumer perspective, the outcome of a merger will depend largely on how the new company operates.  In this situation things probably turned out well, since American General has an excellent reputation.

But what if an insurance provider merges with a company that is not as reputable?  Consumers could be stuck with having to switch to a company that won’t honor their claims, whether it’s due to shady practices, bad company bureaucracy or paperwork that might have gotten lost during the course of the merger.

Unfortunately, consumers will never know if a merger will go in their favor or not.  For this reason they may want to consider sticking with brand-name providers that are not as likely to merge with another company.  Granted, even doing this is not sure-fire, since Home Beneficial Life Insurance had been in business for almost a century.  But consumers might be able to have some security for several years by going with the top insurance providers right now.

However, if their provider does merge, the next best thing is investigation into the new company’s practices.  Customers need to research consumer reviews and complaints levied against the new provider.  They should also be aware of how strong the company is financially… one can’t assume just because they’re merging they are automatically well-off.  If any portion of the research shows that a company is not favorable, consumers should consider finding a different insurance provider altogether.

The merger between American General and Home Beneficial Life happens all the time in business.  Mergers aren’t always a bad thing for the customer, but in some situations they can be annoying.  For this reason it is best if customers go brand-name, since well-off companies tend to not want to give up their branding.  But if the company merges anyway, the next course of action is just making sure the new insurance company is sound.

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