Time To Adjust

This is every bit as short-sighted as market timing and day trading, in that it lacks coordination with, or reference to, the time-tested system of state regulation. It is like an auditor who, upon seeing a few problems at a company, suggests that he take over running the company.

At least the Optional Federal Charter legislation takes a longer view. Under the various OFC proposals, insurers can choose whether to continue with the time-tested system of state charter and regulation or to move over to a federal charter and regulation. It takes the existing system into full account, and allows choice.

Even the OFC legislation itself is long-term. It has been kicking around Congress for years. That gives the body politic plenty of time to digest its provisions and potential impact, and to make revisions accordingly.

Short-term moves do have a place in the economic system–for example, to respond to an emergency or a short period of need. Increasing the FDIC guarantee limits for a specified period is an example. And in deal-making, striking while the iron is hot has always been considered smart business.

But, in other cases, such as those mentioned earlier, the short-term moves are really processes or a way doing of business. That is really tough for long-term-oriented businesses to manage around and through.

Still, unless and until the pendulum swings back, that is what insurance professionals need to do.

For example, an advisor might have some clients who like to do market timing “on the side.” After realizing that this behavior is not going to change, the advisor can 1) decide not to do business with that client or 2) factor that reality into the financial plan.

An insurer may have some market timers among its variable policyholders, and will need to decide whether and how to address that, if it hasn’t already. A company may learn that someone on its own financial team “likes” to time and so will need to address how that proclivity may impact decision-making. Or, some investors may short the insurer’s stock, and the firm will need to manage through that.

As for regulation, some industry leaders are already getting with the program. They are training one eye on the state regulations of today and the other on those that could drop on them like a bomb tomorrow, courtesy of federal sanction.

Regarding products, why keep grousing about how the business has lost its long-term focus? Why not, instead, position insurance as a great counterpoint to the volatility of short-term moves?