In my daily ration of news alerts, I got this consumer alert from the Ohio Department of Insurance. As you can see for yourself, it’s a pretty concise rundown of what retained asset accounts are, what they mean to the consumer and why it’s important for folks to educate themselves on them. I have to commend the Ohio DOI for putting this up as a matter of public education, however, it would have been nice to see the state – and all others, by the way – do this two or three weeks ago when the furor over RAAs was at a fever pitch, rather than now, when the controversy seems to have flamed out for the moment.
The entire flap over RAAS really took a lot of people by surprise, and understandably so. Here we had a common industry practice that nobody was really complaining about until Bloomberg ran an article in late July that painted the entire practice with a pretty sticky brush. A firestorm of controversy ignited soon thereafter with regulators announcing industry probes, companies announcing they’d work with the regulators, and well, you know the rest. You’ve probably either been in the middle of this or been watching it from the sidelines since it began.
As a journalist, events like this are a good thing, as it gives us lots to write about, as we did here, here and here in our coverage of the issue. But as I opined about this in a recent print edition of NUL, this is all a lot of thunder and very little lightning, as my dear grandfather used to say. And the large amount of feedback I got from that op-ed showed me that people in the industry are rightly distressed at how fast a non-issue became a point of crisis for an entire industry.
Sources within the industry tell me that the article that kicked all of this off was not entirely on the level. They tell me that the primary sources consulted for the piece are unhappy with how their quotes have appeared, and the author of the story himself has a bad record with the truth, having been sued for libel previously. Libel is no joke as a journalist. To get cut off from future access to a source isn’t unheard of if you write unflattering stories. But sued for libel? Must have been some story, is all I can say.
As for the probes announced by New York AG Andrew Cuomo, they seem not so much political theatre, as a case of an overeager regulator who shot first and asked questions later, only to find that there really isn’t a whole lot to investigate. The industry’s use do RAAs is long-standing and, I suspect, fairly easy to understand once you get a forensic account on it. On a more cynical note, it comes as little surprise that Cuomo himself is running for governor – the AG title is often jokingly referred to as “aspiring governor.” Hopefully Andrew, should his be succeed, will avoid the kind of spectacular self-destruction that deep-sized Eliot Spitzer. We’ll see. For the moment, Cuomo has a reputation as a guy that likes to bite the political hand that feeds him. Surely the insurance industry is a deep pocket worth courting when it comes to run in elections. An industry burned over nothing at all is an industry with a long memory. Nuff said.
Meanwhile, Bloomberg is still banging the gong on this, unwilling to stop stoking a fire it enjoys warming its hands over. Looking at the scope of their stories, it seems that Bloomberg is fond of making the point that the money in RAAs is better off being held in banks. Give the number of bank failures in recent years compared to the number of insolvent life insurers, I have to question the wisdom of that.
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