If you have been following the retained asset account situation – and I can’t imagine many readers of this blog who have not – then you’ll know that Prudential is at the heart of it. Not that Prudential is necessarily doing anything wrong, but the Bloomberg article that touched this whole issue off did so by using military policyholders as the story’s dramatic fulcrum. Surely if one wishes to make the life industry look bad, there can be no more sympathetic group of victims than our men and women in uniform. And in that, Prudential finds itself squarely in the crosshairs, being the company that sells more life insurance to military personnel than any other.
New York AG Andrew Cuomo has gone back and forth in the intensity with which he has pursued this issue, initially acting almost as the Bloomberg ink dried and subpoenaing companies with no time to think better of it. Apparently, sometime later, after consulting with industry sources (an industry has received political contributions from, mind you) Cuomo appeared to soft-pedal his investigation, but things are moving ahead once more. This proves two things: 1) like many politicians, Cuomo sure enjoys biting the hand that feeds him and 2) like many politicians, he simply cannot turn down such an easy opportunity to score points as an AG (attorney general or aspiring governor? You decide) for the people as when he does it at the expense of the insurance industry.
Meanwhile, the RAA issue has hit the Web-based freelance writing grist mill, with basic information hub pages describing for the average person what retained asset accounts are, and typically doing so from an anti-industry point of view. Whether this is because of a bias on the part of the writer, or because the writers themselves are primarily informed on RAAs by mainstream media coverage of the issue, remains to be seen. But what we are witnessing, as an industry, is the mainstreaming of a concept that RAAs are bad, that the industry knows it, and that the industry is too busy profiteering off the bodies of dead soldiers to care. This is a reputational crisis in the making. No…scratch that. This is a reputational crisis right now. And unless the industry’s best and brightest step forward and boldly address this issue, then things are not likely to tail off any time soon.
So far, we have seen precious little from Prudential, MetLife or any of the other industry giants that have a clear stake in this issue. I have spoken with some of these companies, and there is a earnest belief that RAAs are not just good business practice for the insurer, they are honestly good for the beneficiaries. Personally, I would not have a problem with receiving a RAA voucher, but I can see why somebody might. The trick here is education. Pure, simple, honest, open communication between life insurers and their policyholders on what an RAA is, why it’s a good thing, and why nobody is out to screw them. We have not seen that yet from the life industry. And I’m not talking about making easy talking-point statements to friendly press. I’m talking about straight talk. Companies willing to accept how their critics perceive them, willing to address the political, legal and reputational fallout we’ve seen from this issue so far, and talk openly about why they feel the way they do about RAAs and how to move ahead with this practice.
Here’s the thing. We all know that barring some kind of crazy legislation (which isn’t entirely out of the realm of possibility), RAAs are not going away. They make too much sense from the standpoint of funding life policies themselves and for providing beneficiaries with a method of payment that actually earns them a few bucks while they are in the most acute phase of their grief. After all show me a weeping mother who cashes a life insurance check before her dead son’s funeral and I’ll show you a pig with wings. In fact, had RAAs never been invented, I’ll bet somebody would have filed a class action against the industry for not having some interest-bearing instrument in place to take care of beneficiaries’ money while they are too grief-stricken to cash their checks.
But the unfortunate reality is that the industry is being villainized for this. I can appreciate companies not wanting to follow the lead of, say, Lehman Brothers, which went after its detractors in public and made itself even more unliked in the public eye. But there is a difference between defending what’s right and being a bellicose jerk. The life insurance industry is too busy hiding under its shell to even think about the difference, let alone put it into practice. And the longer it does, the worse this thing is going to get, especially for agents everywhere who, when selling, must bear the brunt of ant anti-industry feelings.
Life insurance is all about playing the long game, and politics and media today are all about the short game. Fine. I get it. But even if this all eventually blows over without directly causing the industry any harm, episodes like this are best thought of as a kind of reputational bioaccumulation – that process by which toxins in the environment slowly leach into the food chain and gradually build up in one’s own body over a long time of continual exposure. That’s what’s happening to the life industry right now, day by day, article by article, sound bite by sound bite. And maybe not today, and maybe not tomorrow, but someday it will result in something catastrophic for the entire industry. I just hope the industry will have the foresight to do something about it before it is too late.
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Note: There will be no updates to this blog over the Labor Day weekend. Posts will resume next Tuesday. Until then, have a great holiday weekend!