By anyone's standards, 2015 was a year of disruption. Monumental legislation changed how we recognize marriage, how we plan our estates and how we pay taxes. Our standards of risk protection were challenged, as threats — cyber, terrorism, gun violence — became alarmingly frequent. And demographics continued to shift, changing the landscape of the workplace and redefining consumer culture.
Here, in no particular order, are the stories we think had the biggest impact on the insurance industry this year. Read, reflect and share your own "story of the year" in the comments section below.
No. 1: A death sentence from the DOL
Perhaps the most important — and potentially damaging — piece of legislation that came to light in 2015 is one that affects the insurance industry: the Department of Labor's proposed fiduciary rule.
Insurance broker/dealers have the most to lose from the DOL fiduciary rule because of their dependence on commissions, proprietary products and individual retirement accounts. It remains to be seen whether the final rule will factor in any of the tremendous volume of industry criticism (and, to a lesser extent, support) registered during several formal comment windows and in-person hearings; whether advisors will still be able to sell to qualified retirement plan clients on commission or other forms of variable compensation; or whether a given segment of advisors will have to start papering best interest contracts. Things should finally become clear as 2016 progresses.
"If you don't want to be a fiduciary, then you'll have work for free under the DOL proposal," said Magenta Ishak, a vice president of political affairs at NAIFA. If the current legislation happens to pass, the industry may see a mass exodus of advisors and a forever-changed insurance and financial planning industry.
— Emily Holbrook
No. 2: Advisor perks come under scrutiny
U.S. Senator Elizabeth Warren, a persistent watchdog for consumers, turned her attention in 2015 to the annuity industry — specifically, the compensation packages annuity producers receive.
Last spring, Sen. Warren sent letters to 15 of the country's largest annuity providers because she didn't like the perks advisors were getting in the form of cruises, international travel, iPads, cash, stock options, even diamond-encrusted 'NFL Super Bowl Style' rings.
According to Warren, the annuity providers wined and dined advisors to "entice sales of their products."
In her letter, the Senator wrote, "Annuity agents that are more interested in earning perks than in acting in their clients' best interest can place Americans' savings and retirement security at risk."
According to Warren, "The questionable practices identified in these letters highlight the need for a strong conflict-of-interest rule from the U.S. Department of Labor (DOL) to protect retirees by requiring advisors to act in their clients' best interests."
What impact Warren's latest crusade will have on future compensation for advisors remains open for debate, but the powerful legislator has President Obama and DOL chief Thomas Perez in her corner. This is one to watch.
— Daniel Williams
No. 3: Hackers hit health care giants
In March of this year, The Washington Post noted that, according to HHS data, more than 120 million health records had been threatened by data breaches since 2009. This enormous number — which would equate to a third of the U.S. population if these were all separate individuals, with no one being impacted by more than one breach — could in fact be just the tip of the iceberg. More than retail outlets or banks, insurers and other health organizations are becoming top targets for cyber breaches because the data they maintain is so valuable on black markets. Hacked health records can sell for more than $10 each, as Allison Bell reported in February, and sometimes for as much as $1,300 each.
The most notable breach, of course, was the Anthem hack in February 2015, in which 80 million health records were compromised. This was followed by attacks at Premera and UCLA Health System. In the weeks and months to come, there will be others. And it's not just health insurers that need to be on guard. Any organization that stores or transfers sensitive information could be a target. Doug French, managing principal of the Insurance and Actuarial Services at Ernst & Young, has called data security the No. 1 emerging risk in the world. This is one story that is not finished yet. It will only continue to get more sophisticated and more threatening.
— Nichole Morford
No. 4: Insurers get creative in a low yield environment
Much has been written about U.S. life insurers' years-long wait for a rise in short-term interest rates. That move came at long last on December 16, when the Federal Reserve ratcheted up its benchmark Federal Funds rate by 25 basis points.
Less widely explored among industry-watchers is how life insurers have adapted to historically low rates to boost investment yields, cash flow and, ultimately, profits. The savvier ones, it's clear now, have revamped their asset allocation strategies.
