Some people say the market timers ruined it for everybody.
Other people say the day traders ruined it for everybody.
Still others say the federal regulators ruined it for everybody.
The "it" refers to the safe, stable world of long-term investing and planning, and long-term insurance products.
This has been "ruined," these people say, by short-term approaches. Examples range from market timing inside of tax-qualified plans and products to, say, the sale of life policies 2 years after policy issue. Throw in some speculative investing, day trading, and shorting of stocks, and the money is on the fast track.
Oh, and top it off with a lot of liquidity features in the insurance products, so people can put money in and take it out almost like a savings account. Sounds long-term but feels short-term.
Meanwhile, the federal regulators–and let's include the Financial Industry Regulatory Authority here along with the Securities and Exchange Commission–are pushing their way into insurance product regulation territory.
This is happening not just by way of review of practices and filings solidly within their purview, but also by fiat–i.e., issuing FINRA Notices and SEC Rules that seek to control various product particulars. Recent examples include: FINRA Notice 05-50, regarding index annuities, and SEC Rules 151A and 12h-7, regarding index and variable annuities, respectively.
These moves are being promoted as a way to protect the investing public, and that has a kind of long-term sheen to it. But scratch the surface just a bit and it looks very different.
Such efforts appear devoid of connection to the established (read, long-term) regulation of the specified products. Further, the advocates lack sufficient (read, long-term) experience in insurance to make consistently sound decisions about the products they propose to regulate.
The states have regulated insurance since the 1800s, and the system was officially buttressed by the McCarran-Ferguson Act of 1945. Yet the feds are seeking to usurp that long-term authority by regulating certain insurance products (or aspects of those products)–with very little documentation to support such a move.
