If you have been following the retained asset account situation – and I can’t imagine many of you have not – then you’ll know how the life industry has suddenly found itself squarely in the crosshairs of a controversy the public hardly understands, but is too busy being outraged at the perceived mistreatment of military personnel to care. New York AG (that’s “aspiring governor,” by the way) Andrew Cuomo’s investigation of RAAs has been particularly discouraging, as he seems to be acting with more speed than insight against an industry at which he seems to enjoy taking cheap shots. 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. What we are witnessing is the mainstreaming of a concept that RAAs are bad and that the industry knows it but is too busy profiteering off of dead soldiers to care.
So far, we have seen precious little from any of the industry giants that have a clear stake in this issue. I have spoken with some of these companies, and there is a clear and 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. 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. (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.)
The unfortunate reality is that the life industry is being villainized for this. I can appreciate companies not wanting to emulate, say, Lehman Brothers, which made itself even more unlikeable by going after its detractors publicly. But there is a difference between defending what’s right and being a 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.
Life insurance is all about playing the long game, and politics and media today are all about the short game. But even if the RAA thing eventually blows over, episodes like this leave a gradually thickening residue on the industry’s reputation. It is happening right now, day by day, article by article, sound bite by sound bite. Someday it will result in catastrophe. I just hope the industry will do something about it before it is too late.
This editorial was excerpted from a post on the Gamut blog, which you can read daily at lifeandhealtheditor.com. There is also a link to each new posting through the National Underwriter Life & Health daily eNewsletter. Check it out!