For an industry that is not used to turmoil and upheaval, the life and health world is sure going through some tumultuous times. The list of challenges is long and ever-changing, including context-altering federal regulation, an open question as to the roles of state versus federal regulation itself, increased public scrutiny on practices such as retained asset accounts and asymmetrical use of the Death Master File, and ongoing financial pressures from a variety of fronts. Many of this industry's professionals are nearly 60 years old and can see their retirement approaching, and the last thing anybody wants is to spend their home stretch forced to reinvent themselves.
But that is what is happening, and not everybody is happy about it. National Underwriter Life & Health gets a great deal of feedback from its readers on who or what is wrong with things affecting the industry these days, so to that end, we have compiled a list of those people or forces that are doing the most to hold the industry back in some way, shape of form. These "public enemies," if you will, are what has become our first-ever Rogue's Gallery.
Many of you have already commented on who has made the list and who has not. But for those of you who are seeing this list for the first time, let us know what you think. Who should be on the list who isn't? And who isn't on the list who should be? Send us a letter, leave a comment or tweet about it on the #rogue hashtag. In the meantime, here are the Top 10 Rogues making your professional life more difficult than it needs to be. Some are merely misguided, some are clueless and some are craven. But all are causing the industry some kind of harm, and the sooner the industry has a consensus on how to deal with it, and takes action, the better.
Let's get this started with our #10 rogue, which made headlines this year when it gave the entire U.S. financial system a black eye…
No. 10: Standard & Poor's
Standard & Poor's for its wrong-minded downgrading of the United States' sovereign credit rating. With the financial chaos enveloping the Eurozone these days, suddenly the dollar is looking better and better. Plus, the downgrade seemed to be spurred at least in part by the threatened credit default over the credit limit debate earlier this year, which Washington's smartest insiders could tell that despite all the intransigent talk, Congress wasn't really about to let the world's single largest economy go into default over a procedure that has been approved dozens of times in recent decades. To be fair, as a result of the downgrade, a lot of people shifted their investment strategy to buying bonds, which is ultimately a good thing. Still, S&P didn't do the tarnished credibility of rating agencies in general (AIG, anyone?) any favors with the downgrade, and it kept alive a troubling conversation: if the rating agencies can't be relied upon to rate things credibly, then who could be? Surely not the government, but that looks like where we are headed. After all, the rating agency is a for-profit enterprise with conflicted interests, earning money from the very companies it rates, and acting in what has become a quasi-governmental function. And yet, nobody seems to have a lot of faith in rating agencies. We are just one more rating agency disaster away from the Federal Financial Services Assessment Act of 2012. If ever there would be a case of trying to put out a fire with gasoline, that would be it.
(Dis)Honorable Mention
Barney Frank (D-MA) for his role in Dodd-Frank, SIFI, and everything else he's done to make the life and health industry such an interesting business lately. It seems unlikely that the industry will shed many tears when Frank retires. He didn't make the list mainly because his role as a legislator is done. However, he is likely to remain in the public eye as a speaker and educator, so he may yet continue to direct the national conversation over how the financial services industry ought to conduct itself. Plus, he didn't make the list because according to Washington insiders, whatever legislation Frank pursued, he always kept his insurance counterparts from Massachusetts in mind and wasn't above throwing them a bone.
No. 9 Buddy Velastro
Buddy Velastro, the "Cake Boss" for running the most successful bakery in the Northeast, having the most successful reality show on TLC, and for convincing an increasingly obese country that cake is its own food group. Meanwhile, obesity-related disease is costing the healthcare system an avoidable $160 billion in additional medical costs each year. That's the GDP of Romania. At a time when the entire health insurance industry's primary contention with PPACA is that it doesn't address the real problem with health insurance—its ever-increasing cost—one of the simplest loss prevention strategies across the board would be to reduce obesity and all of the additional stress it puts on our health care system. The industry could be doing a whole lot more to encourage wellness and to incentivize healthy living, but the problem does not start there. It starts with the public's inability to police itself when it comes to food. This is not just an American problem; obesity is plaguing the entire First World, but nowhere is the problem as acute as it is here. And to that end, we come back to Velastro and his bakery, and the line of dozens of people standing outside of it on any given day. There are two health food stores (and good ones, too) within a block of Carlo's Bakery, but do they have lines? Of course not.
(Dis)Honorable Mention
Gov. Andrew Cuomo (D-NY) for spearheading the downsizing of the insurance office and financial services office into a single regulatory body, all while seeking to turn up the heat on insurers through issues such as unclaimed assets. You cannot do more with less on the regulatory front and expect the best results for both the industry and the public. But then again, should we expect anything less from somebody who used his position as AG to bash insurers and earn himself a ticket to the governor's mansion? (As the old joke goes, AG really stands for Aspiring Governor.) He didn't make the list because New York remains one of the high-water marks for regulatory quality, and he is rightly letting Insurance Superintendent Benjamin Lawsky take point on insurance matters.
No. 8 Therese Vaughan
Therese Vaughan and the NAIC for putting its own interests before the public, for obstructing a more efficient approach to regulation (FIO, Solvency II), and for a gut-busting budget that makes us all wonder: what does it really need with all that money? Nowhere do we see the Association's strange priorities more than in the its ill-fated and contentious vote in late 2011 to make a formal suggestion to the Department of Health and Human Services that health insurance agents somehow get carved out from the MLR itself. The MLR, of course, requires that at least $.80 of every health insurance premium dollar go toward actual medical care, thereby throttling how much profit insurers can make. This, in turn, is pressuring carriers, who are either cutting agent commissions to make up the difference, or are considering doing so. This has led to intense industry lobbying to find a way to deal agents back into the game, and understandably so. But is this really a state regulatory issue the NAIC needs to champion? The HHS didn't seem to think so, and it promptly blew off the NAIC's suggestion. And why not, really? The MLR was made specifically to reduce the cost of health insurance to the consumer, and the most easily cut cost is any kind of middleman, so how the could the HHS realistically be expected to grant an exception to the MLR that would counter the reason for the MLR itself? Plenty of folks within the NAIC knew this, which is why the MLR vote itself was such a close one. Critics of the vote noted that the NAIC itself brought forth the vote in a questionable way and said the vote would ultimately cost the group credibility. The speed with which the HHS shot down the MLR suggestion only proves that point.
(Dis)Honorable Mention
Kathleen Sebelius, Secretary of the Department of Health and Human Services as the avatar for everything that's troubling the industry over PPACA implementation. You could argue that she has an even greater responsibility for the effects of PPACA than the legislators who wrote and passed it, since the law itself is so sketchily written, it really won't become reality until the whole thing is implemented, and that is where Sebelius steps in, with the unenviable task of trying to make a porous law something that can hold water. Therein lie the many decisions being made that are trying to turn the health insurance industry into something that it is not. (Dis)Honorable mentions also go to her colleagues in PPACA implementation: Steven Larsen, head of the Center for Consumer Information and Insurance Oversight, and Phyllis Borzi, secretary of the Department of Labor. Sebelius didn't make the list because ultimately, she is not making policy; she is merely enforcing it. Anything she does that hurts the industry was already set in motion long before by legislators, most of whom seem to not have the best grasp on how the insurance industry actually works.
No. 7 Mary Schapiro
Securities and Exchange Commission Chairman Mary Schapiro for her role in pushing forward with an uneven fiduciary standard for brokers that even Barney Frank has problems with, and for persisting with suggesting that variable annuities are, at heart, a securities product requiring securities regulation. Therein lies the urge to push forward a fiduciary standard, and while not all professionals (namely, those who already have a broker's license) think such a standard is a bad thing, others do. Keep in mind, this is from the same SEC that brought us the abortive Rule 151A last year in an ongoing effort to expand its regulatory footprint into an insurance industry that does not really need it. And even if it did, having yet another regulatory force overseeing insurers is only making all regulation that much more fractured and inefficient. We already have the NAIC, the FIO (which only serves in an advisory role) and the Financial Stability Oversight Committee (whose SIFI designation caries with it significant regulatory implications). If ever there is a case of too many cooks spoiling the broth, it is financial regulation, and right now, there seems to be a turf war among federal and state groups to all determine the future direction of insurance regulation. In that kind of battle, everybody loses.
(Dis)Honorable Mention
The Tohoku Earthquake and Tsunami for the nation-wracking damage it caused, in which the resulting $2.5 billion in life claims is just the smallest part. Our hearts continue to go out to the people of Japan, but not necessarily to the executives of the Fukushima nuclear power plant, who were in a state of denial over the radioactive risk their stricken reactors posed to the rest of the country. Anybody who seriously studied the effects of Three Mile Island can tell you that the radioactive exposure in central Pennsylvania was far worse than officials recognized, and the same is likely to be true in Japan. Case in point: In December, baby formula was pulled off the shelves in Japan because—you guessed it—it contained unacceptably high levels of radioactive material in them. Yum. The Tohoku disaster didn't make the list because ultimately, this was a natural event beyond anybody's control. Japan is the most quake-proof country in the world, and to that end, the Japanese deserve huge credit for containing the damage of this event as much as it possibly could have been. But ultimately, this was an example of how we are at the mercy of forces we cannot master.
No. 6 Mark Zuckerberg
Mark Zuckerberg for that damned Facebook of his. The life and health industry still does not really understand social media, which could be the greatest sales and networking tool ever devised if the industry just made a concerted effort to engage it. The numbers don't lie: There are 800+ million Facebook users at the moment. If that was a nation, it would be the world's third-largest, behind China and India and ahead of the United States. Clearly, there is an audience worth speaking to, but for the moment, it remains largely a channel for industry detractors to spread their message. Go ahead and sneak a peek at your kids' Facebook page sometime and ask them to link some news story that is critical of insurance and watch all of the negative comments roll in. It does not have to be this way. Insurance agents have remarkable power to evangelize their profession and why people need it. So far, that has been a very personal evangelism, person to person, prospect by prospect. But once agents start creating rock star status for themselves not just on Facebook, but across other social media platforms (Twitter, LinkedIn, YouTube, Klout, Tumblr…take your pick), you get a chance to make a real difference in how insurance itself, and the industry behind it, is perceived. But it is not an easy task. All those social media users? They are remarkably fragmented, and they can sense insincerity a million miles away, so applying traditional marketing efforts to social media simply will not work. This is bad news for an industry that still seems slow to understand this one, crucial fact: they are no longer speaking to prospects, but to an audience.
