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The Perils Of Confusing Want And Need

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A few decades ago the Rolling Stones famously sang: “You can’t always get what you want; but if you try sometime, you might find, you get what you need.”

There is, to be sure, a subtle but significant difference between need and want, a nuance that the American Council of Life Insurers failed to detect recently about a project it was aggressively pushing.

The ACLI’s failure to convey its need for capital and surplus relief in a way that made state commissioners feel a sense of urgency led to a stinging vote rejecting a fast-tracked capital relief proposal before the National Association of Insurance Commissioners.

Instead, what those in the peanut gallery (and apparently at the commissioners’ table too, given the stunning 16-1 final vote to approve the proposal), took away during a special Jan. 27 hearing in Washington was a stream of words from the ACLI, but not one that was based on dire necessity.

The peanut gallery, incidentally, can’t speak about many of the words used before the hearing because those conversations between the ACLI and regulators were largely kept behind closed doors.

Technical jargon such as “ultraconservative capital and reserve numbers” does not strike home like specifics such as ‘there is a major company that will go under in 2 months if you don’t give us this lifeline.’

The news for the past 5 months has been peppered with real instances of “emergency,” names that do conjure up financial peril: AIG, Lehman, and Merrill Lynch, to name a few.

So, the words offered by the ACLI landed with a tone-deaf thud. Tone-deaf because the ACLI failed to pick up on the real fear that average Americans are experiencing. Or perhaps it did pick up on it and thought that this would be a good opportunity to light a fire under commissioners to satisfy a want.

But even if using a real financial crisis is cynical, there is still a lot of good that came out of this regulatory equivalent of crying ‘fire’ in a theater.

The first bit of good news is that, at least from information that is publicly available, no life insurers are in danger of tanking. Now that’s a message that does anyone’s heart good.

The next bit of good news is that at least after an initial false start, commissioners rebounded and truly showed their mettle. For the first month, everyone was kept in the dark about what was going on except for sketchy details at a half-hour NAIC session during the winter meeting and a more detailed written response to the proposal released on Dec. 17, 2008.

They finally opened up the discussion with a period of public comment, an extensive day of public testimony and a chance for the proposal to get a full NAIC vote by moving it up and out of the working group. Regulators’ questioning and assessment of what they were hearing were pretty straightforward.

That brings us to the next piece of good news. The NAIC, by taking the more measured, logical approach to an issue and not getting caught up in the hysteria of an economy that is currently on the skids, has reinforced both the case for state regulation and the effectiveness of its financial solvency oversight.

It has also created the potential to forge better relations with state insurance legislators at the National Conference of Insurance Legislators, which expressed vehement opposition to the push ACLI was giving its proposal.

There is even some good news for the ACLI in the wake of its debacle. Comments prior to the regulators’ vote indicate that the lack of perceived urgency was their main reason for not taking immediate action. Indeed, many of the commissioners said that there might be merit in some of the points ACLI made in its proposal. They also expressed a willingness to work on these points in the normal course of the model law process. Several of the points related to principles-based reserving are, in fact, already going through that more thorough vetting process.

So, take heart ACLI. It might be possible to get what you want after all. And with a tip of the hat to Mick Jagger, “you might find you get what you need.”


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