RAAs: Reputational Outbreak has Begun

Yesterday, you may have noticed a followup article from Bloomberg on the retained asset account (RAA) controversy that Bloomberg itself manufactured some weeks ago. For those of you who haven’t been following this, near the end of July, Bloomberg ran “Fallen Soldiers’ Families Denied Cash as Insurers Profit,” an article supposedly exposing the evils of retained asset accounts and their use with life insurance, mainly sold by Prudential, to military personnel. To anybody in the life insurance industry, RAAs were nothing new, but as Dave Evans, the author of the article would have you believe, they were nothing short of a sinister bit of industry sneakiness designed to

• deny beneficiaries’ their money for at least a little while so
• the insurance industry could profit over the still-warm bodies of valiant soldiers slain in the line of duty.

The resulting firestorm over all of this has caught the entire industry flat-footed, but none so much as Prudential, the primary subject of Bloomberg’s ongoing coverage of this story. Since the original Bloomberg story ran, Prudential has taken a drubbing over all of this, with an investigation by New York AG (and gubernatorial candidate) Andrew Cuomo, a class action lawsuit (leading one to wonder if the article wasn’t leaked to Bloomberg by the attorneys looking to get support for a suit they were looking to file anyway) and by the general public, which has gone along with the Bloomberg angle, succumbing to their natural tendencies to assume the worst from an industry it knows precious little about.

Here’s the thing: RAAs are nothing new, Bloomberg’s original article is simply bad and opportunistic journalism, and I strongly doubt any lasting policy will be crafted from this. Bloomberg has gone to such lengths to flog the story that now it is committed to selling a problem it has created. Hence, followup coverage like yesterday’s article alleging a secret deal between the VA and Prudential over RAAs. It makes Prudential look bad, and honestly, I really feel for Bob DeFillippo, Pru’s spokesperson, who is stuck dealing with all of this. Bob and his colleagues at Prudential are rightly frustrated over Bloomberg’s treatment of what has been widely considered to be a legitimate industry practice. I suspect their counterparts over at MetLife and any other company dragged into the RAA thing feel likewise.

The point to all of this, once again, is industry response. As I wrote in the most recent issue of National Underwriter, while the industry’s many detractors are having a field day over RAAs, the industry itself has done precious little to do anything about it. Discretion is the better part of valor, sure. But even an elephant can only withstand so many bee stings before it must do something about it, and the latest mutation of the public furor over RAAs is that yesterday’s Bloomberg article was linked over on FARK. If you’re not familiar with FARK, it is a news aggregation site, one of the first really popular ones, in fact, and it has a thriving community whose knack for generating heat on news stories often determines what larger, slower, more mainstream outlets decide to cover. That big story on whatever it was you read in yesterday’s paper or saw on the 11 o’clock news the other night? Chances are the original form of the story ran two or three days earlier and FARK picked it up.

Why do I mention this? Because FARK is an interesting baraometer of public opinion. It’s snarky and partisan (though its editors try hard to make sure for every godless communist comment or link, they counter it with a jackbooted fascist one) but it’s a legit window into what online readers are thinking. The gimmick of FARK is that when stories are linked to it, linkers give the story their own headline, often with humorous intent. Getting an article “greenlit” on FARK is not easy. There’s a lot of competition. And only the funniest headlines make it. Or the headlines sure to generate the most conversation. So when yesterday’s link to Bloomberg’s article read…

Upon further review, Department of Veterans Affairs struck a secret deal in 1999 to allow Prudential to turn the death benefits of U.S. service members into a $662 million hedge fund

…you can imagine what result FARK’s editors were looking for.

To say that the ball is in Bloomberg’s court on RAAs is a bit of an understatement. Bloomberg, and anybody that agrees with it or thinks by default that the industry is up to no good, is determining the public conversation on this issue. So far, we’ve seen some tepid industry response, like the ACLI’s canned statement on RAAs when the story first broke, but honestly, who is really going to read something like that? Certainly not the people the ACLI need to convince. And therein lies the problem.

As it tries to remain above the ugly fray of public opinion making, the industry puts itself in a no-win situation. It, led by companies such as Prudential, can descend into a public street brawl with Bloomberg and Cuomo and look like a company that has something to hide, or it can remain silent on the issue and look like a company that doesn’t care that the little people think the Rock and its industry peers are a huge confederacy of thieves. This is a Gordian knot of public outreach if ever there was one.

I have spoken with numerous life industry professionals over this, and they uniformly express how distressed this thing makes them. but there is also a sense of resignation, too, that no matter what they do, they will be cast as villains by lazy journalists, opportunistic politicians, and knuckleheads commenting from the sidelines. But does it really have to be this way? The life agent is the one who carries the most water on this, ultimately, for it is he or she who must confront a preconceived notion in the back of their clients’ heads every time they meet with them. Sooner or later, all this stuff catches up with the agents (as well as the carriers and everybody else in the industry), and it’s a damned shame, honestly.

Below are some comments I’ve excerpted from the followup discussion on FARK’s reposting of the Bloomberg story. A lot of it is crazy talk, ill-informed and more than a little bit profane. At least one of the comments looks like it came from a Prudential employee. And another makes an oblique death threat against Prudential in general. But this is what folks are saying about your industry, people. It is unvarnished opinion from the same people who will one day vote for guys like Cuomo and sit on class action juries, so take heed. Maybe what we need is for folks who support RAAs to sound off on the topic and generate some counter-buzz. Because if you look for comment on RAAs right now, the only thing you’re likely to find are things like this:

some farktards need to go to prison for this shiat and Prudential should be forced to cough up all the interest they collected doing this shiat…

Get a piece of the rock…and profit from American war dead while you’re at it!

Interesting reading. It will be even more interesting to see how Prudential is defended in this by our in-house corporate flaks.

And if you’re a Republican, you have to support Prudential’s actions here. you have no choice, this is your philosophy. you have to support corporate america’s ‘right’ to abuse anyone or anything in the name of profit.