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Regulation and Compliance > State Regulation


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It’s weeks like this–when there’s a veritable explosion of lawsuits, investigations, regulatory demands and accusations–that you begin to wonder how industry leaders and just plain old practitioners deal with the fact that the insurance business is a multi-billion dollar punching bag.

Or perhaps a pi?ata is a more apt description since, after being smashed in the courts or at the hands of state and/or federal regulators, a pile of money usually comes gushing out.

All you have to do is go to pages 6, 7 and 10 of this week’s issue to see that regulators of every stripe are on the industry’s case. Some of these are long-continuing sagas, such as unsuitable sales of investment products like annuities to senior citizens.

Similarly, there have been widespread reports of agents misrepresenting private Medicare Advantage plans to seniors because the commissions on those plans are fatter. Congress is taking note and you can bet that tighter supervision of sales is in the forecast, since both the House and Senate have held hearings on the issue.

This is not to mention the lambasting that companies that market Medicare Advantage plans have come in for, especially from Rep. Pete Stark of California. This is because, according to the Congressional Budget Office, the MA program costs about 12% more on average than the cost to Medicare of traditional fee-for-service providers.

I’d also guess that the investigation New York State Attorney General Andrew Cuomo launched with a great deal of fanfare is not going to blow over quickly. First of all it’s going to have a lot of resonance with the public, which feels at the mercy of health insurance companies and, therefore, hates them. Mr. Cuomo, being the politician he is, knows a good thing when he sees it, so he’s not going to back off. Just look where media-splashing investigations got the man who was the former New York AG and is now governor of the state, Eliot Spitzer.

Out in Minnesota that state’s AG has been busy filing serial lawsuits against index annuity companies because their agents allegedly misrepresented or otherwise sold products inappropriate for seniors.

That’s hardly the end of it, but my head’s getting tired. Now, for a few thoughts.

First and obviously, if bad sales have occurred the perpetrators should be punished and consumers made whole. But there needs to be some balance on the part of regulators and politicians. The vast majority of agents and advisors are honorable and do business with honorable intentions. It does not do to besmirch an entire profession because of some bad specimens. Politicians above all should know that and get off their self-righteous stands.

Second, the issue of whether seniors need special protection is something that is debatable. One would think from the stories trotted out at congressional hearings that most seniors (and what age are we talking about here? Over 55, 62, 65, 70, 80?) are sitting there like chickens just waiting to be plucked. That they have little or no understanding of how the world works. Somehow, most seniors I know don’t quite fit that description and as boomers (reluctantly) move into seniorhood, you can expect seniors’ savviness to increase.

Third, if regulators and politicians were really so interested in tracking down malefactors, then how about going big time after some of those execs at investment banks that gambled billions of other people’s money as if it were their own and then when the losses piled up, left with big fat bonuses.

And finally, if investors need to be protected, let’s start arming them early with financial education they can use. How about it, Congress? Can you put your money where your mouth is?


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