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For an industry that is not used to turmoil and upheaval, the life and health world is sure going through some tumultuous times. The list of challenges is long and ever-changing, including context-altering federal regulation, an open question as to the roles of state versus federal regulation itself, increased public scrutiny on practices such as retained asset accounts and asymmetrical use of the Death Master File, and ongoing financial pressures from a variety of fronts. Many of this industry’s professionals are nearly 60 years old and can see their retirement approaching, and the last thing anybody wants is to spend their home stretch forced to reinvent themselves.

But that is what is happening, and not everybody is happy about it. National Underwriter Life & Health gets a great deal of feedback from its readers on who or what is wrong with things affecting the industry these days, so to that end, we have compiled a list of those people or forces that are doing the most to hold the industry back in some way, shape of form. These “public enemies,” if you will, are what has become our first-ever Rogue’s Gallery.

Many of you have already commented on who has made the list and who has not. But for those of you who are seeing this list for the first time, let us know what you think. Who should be on the list who isn’t? And who isn’t on the list who should be? Send us a letter, leave a comment or tweet about it on the #rogue hashtag. In the meantime, here are the Top 10 Rogues making your professional life more difficult than it needs to be. Some are merely misguided, some are clueless and some are craven. But all are causing the industry some kind of harm, and the sooner the industry has a consensus on how to deal with it, and takes action, the better.

Let’s get this started with our #10 rogue, which made headlines this year when it gave the entire U.S. financial system a black eye…

No. 10: Standard & Poor’s   

Standard & Poor's

Standard & Poor’s for its wrong-minded downgrading of the United States’ sovereign credit rating. With the financial chaos enveloping the Eurozone these days, suddenly the dollar is looking better and better. Plus, the downgrade seemed to be spurred at least in part by the threatened credit default over the credit limit debate earlier this year, which Washington’s smartest insiders could tell that despite all the intransigent talk, Congress wasn’t really about to let the world’s single largest economy go into default over a procedure that has been approved dozens of times in recent decades. To be fair, as a result of the downgrade, a lot of people shifted their investment strategy to buying bonds, which is ultimately a good thing. Still, S&P didn’t do the tarnished credibility of rating agencies in general (AIG, anyone?) any favors with the downgrade, and it kept alive a troubling conversation: if the rating agencies can’t be relied upon to rate things credibly, then who could be? Surely not the government, but that looks like where we are headed. After all, the rating agency is a for-profit enterprise with conflicted interests, earning money from the very companies it rates, and acting in what has become a quasi-governmental function. And yet, nobody seems to have a lot of faith in rating agencies. We are just one more rating agency disaster away from the Federal Financial Services Assessment Act of 2012. If ever there would be a case of trying to put out a fire with gasoline, that would be it.

(Dis)Honorable Mention

Barney Frank

Barney Frank (D-MA) for his role in Dodd-Frank, SIFI, and everything else he’s done to make the life and health industry such an interesting business lately. It seems unlikely that the industry will shed many tears when Frank retires. He didn’t make the list mainly because his role as a legislator is done. However, he is likely to remain in the public eye as a speaker and educator, so he may yet continue to direct the national conversation over how the financial services industry ought to conduct itself. Plus, he didn’t make the list because according to Washington insiders, whatever legislation Frank pursued, he always kept his insurance counterparts from Massachusetts in mind and wasn’t above throwing them a bone.

No. 9 Buddy Velastro

Buddy Velastro

Buddy Velastro, the “Cake Boss” for running the most successful bakery in the Northeast, having the most successful reality show on TLC, and for convincing an increasingly obese country that cake is its own food group. Meanwhile, obesity-related disease is costing the healthcare system an avoidable $160 billion in additional medical costs each year. That’s the GDP of Romania. At a time when the entire health insurance industry’s primary contention with PPACA is that it doesn’t address the real problem with health insurance—its ever-increasing cost—one of the simplest loss prevention strategies across the board would be to reduce obesity and all of the additional stress it puts on our health care system. The industry could be doing a whole lot more to encourage wellness and to incentivize healthy living, but the problem does not start there. It starts with the public’s inability to police itself when it comes to food. This is not just an American problem; obesity is plaguing the entire First World, but nowhere is the problem as acute as it is here. And to that end, we come back to Velastro and his bakery, and the line of dozens of people standing outside of it on any given day. There are two health food stores (and good ones, too) within a block of Carlo’s Bakery, but do they have lines? Of course not.

(Dis)Honorable Mention

Andrew Cuomo

Gov. Andrew Cuomo (D-NY) for spearheading the downsizing of the insurance office and financial services office into a single regulatory body, all while seeking to turn up the heat on insurers through issues such as unclaimed assets. You cannot do more with less on the regulatory front and expect the best results for both the industry and the public. But then again, should we expect anything less from somebody who used his position as AG to bash insurers and earn himself a ticket to the governor’s mansion? (As the old joke goes, AG really stands for Aspiring Governor.) He didn’t make the list because New York remains one of the high-water marks for regulatory quality, and he is rightly letting Insurance Superintendent Benjamin Lawsky take point on insurance matters.

No. 8 Therese Vaughan

Therese Vaughan

Therese Vaughan and the NAIC for putting its own interests before the public, for obstructing a more efficient approach to regulation (FIO, Solvency II), and for a gut-busting budget that makes us all wonder: what does it really need with all that money? Nowhere do we see the Association’s strange priorities more than in the its ill-fated and contentious vote in late 2011 to make a formal suggestion to the Department of Health and Human Services that health insurance agents somehow get carved out from the MLR itself. The MLR, of course, requires that at least $.80 of every health insurance premium dollar go toward actual medical care, thereby throttling how much profit insurers can make. This, in turn, is pressuring carriers, who are either cutting agent commissions to make up the difference, or are considering doing so. This has led to intense industry lobbying to find a way to deal agents back into the game, and understandably so. But is this really a state regulatory issue the NAIC needs to champion? The HHS didn’t seem to think so, and it promptly blew off the NAIC’s suggestion. And why not, really? The MLR was made specifically to reduce the cost of health insurance to the consumer, and the most easily cut cost is any kind of middleman, so how the could the HHS realistically be expected to grant an exception to the MLR that would counter the reason for the MLR itself? Plenty of folks within the NAIC knew this, which is why the MLR vote itself was such a close one. Critics of the vote noted that the NAIC itself brought forth the vote in a questionable way and said the vote would ultimately cost the group credibility. The speed with which the HHS shot down the MLR suggestion only proves that point.

(Dis)Honorable Mention

Kathleen Sebelius

Kathleen Sebelius, Secretary of the Department of Health and Human Services as the avatar for everything that’s troubling the industry over PPACA implementation. You could argue that she has an even greater responsibility for the effects of PPACA than the legislators who wrote and passed it, since the law itself is so sketchily written, it really won’t become reality until the whole thing is implemented, and that is where Sebelius steps in, with the unenviable task of trying to make a porous law something that can hold water. Therein lie the many decisions being made that are trying to turn the health insurance industry into something that it is not. (Dis)Honorable mentions also go to her colleagues in PPACA implementation: Steven Larsen, head of the Center for Consumer Information and Insurance Oversight, and Phyllis Borzi, secretary of the Department of Labor. Sebelius didn’t make the list because ultimately, she is not making policy; she is merely enforcing it. Anything she does that hurts the industry was already set in motion long before by legislators, most of whom seem to not have the best grasp on how the insurance industry actually works.

No. 7 Mary Schapiro

Mary Schapiro

Securities and Exchange Commission Chairman Mary Schapiro for her role in pushing forward with an uneven fiduciary standard for brokers that even Barney Frank has problems with, and for persisting with suggesting that variable annuities are, at heart, a securities product requiring securities regulation. Therein lies the urge to push forward a fiduciary standard, and while not all professionals (namely, those who already have a broker’s license) think such a standard is a bad thing, others do. Keep in mind, this is from the same SEC that brought us the abortive Rule 151A last year in an ongoing effort to expand its regulatory footprint into an insurance industry that does not really need it. And even if it did, having yet another regulatory force overseeing insurers is only making all regulation that much more fractured and inefficient. We already have the NAIC, the FIO (which only serves in an advisory role) and the Financial Stability Oversight Committee (whose SIFI designation caries with it significant regulatory implications). If ever there is a case of too many cooks spoiling the broth, it is financial regulation, and right now, there seems to be a turf war among federal and state groups to all determine the future direction of insurance regulation. In that kind of battle, everybody loses.

(Dis)Honorable Mention

Tohoku Earthquake

The Tohoku Earthquake and Tsunami for the nation-wracking damage it caused, in which the resulting $2.5 billion in life claims is just the smallest part. Our hearts continue to go out to the people of Japan, but not necessarily to the executives of the Fukushima nuclear power plant, who were in a state of denial over the radioactive risk their stricken reactors posed to the rest of the country. Anybody who seriously studied the effects of Three Mile Island can tell you that the radioactive exposure in central Pennsylvania was far worse than officials recognized, and the same is likely to be true in Japan. Case in point: In December, baby formula was pulled off the shelves in Japan because—you guessed it—it contained unacceptably high levels of radioactive material in them. Yum. The Tohoku disaster didn’t make the list because ultimately, this was a natural event beyond anybody’s control. Japan is the most quake-proof country in the world, and to that end, the Japanese deserve huge credit for containing the damage of this event as much as it possibly could have been. But ultimately, this was an example of how we are at the mercy of forces we cannot master.

No. 6 Mark Zuckerberg

Zuckerberg

Mark Zuckerberg for that damned Facebook of his. The life and health industry still does not really understand social media, which could be the greatest sales and networking tool ever devised if the industry just made a concerted effort to engage it. The numbers don’t lie: There are 800+ million Facebook users at the moment. If that was a nation, it would be the world’s third-largest, behind China and India and ahead of the United States. Clearly, there is an audience worth speaking to, but for the moment, it remains largely a channel for industry detractors to spread their message. Go ahead and sneak a peek at your kids’ Facebook page sometime and ask them to link some news story that is critical of insurance and watch all of the negative comments roll in. It does not have to be this way. Insurance agents have remarkable power to evangelize their profession and why people need it. So far, that has been a very personal evangelism, person to person, prospect by prospect. But once agents start creating rock star status for themselves not just on Facebook, but across other social media platforms (Twitter, LinkedIn, YouTube, Klout, Tumblr…take your pick), you get a chance to make a real difference in how insurance itself, and the industry behind it, is perceived. But it is not an easy task. All those social media users? They are remarkably fragmented, and they can sense insincerity a million miles away, so applying traditional marketing efforts to social media simply will not work. This is bad news for an industry that still seems slow to understand this one, crucial fact: they are no longer speaking to prospects, but to an audience.

(Dis)Honorable Mention

Belpointe Three

The Belpointe Three for giving financial advisors everywhere a bad name. Really, what do a bunch of wealthy financial advisors from Greenwich, CT need to play the lottery for? While the responsible manner in which they’ve handled their winnings is to be commended, it is more than offset by the messages they have sent to a public that is increasingly skeptical of all financial services professionals, especially those whose job is to show folks how to plan for the future, but whose own plans seem to include Hail Mary passes at instant fortune. That’s no way to lead by example. They didn’t make the list because at the end of the day, it’s hard to really hold anybody over the coals for playing the lottery. There are far worse crimes. Plus, we can’t help but think that if this lottery win takes these three advisors out of the market, that’s probably a good thing.

No. 5 Ben Bernanke

Ben Bernanke

Federal Reserve Chairman Ben Bernanke for his work to keep interest rates artificially low. While he’s doing it to try to help the larger economy, it’s starving anybody who has written large books of annuity, long-term disability and long-term care insurance. As such, the industry is trying to push for riskier financial strategies to make up the difference…which could have catastrophic consequences. The sale of annuities now accounts for about half of the life and health industry’s total income (with health/disability insurance accounting for about a quarter, and life insurance accounting for slightly less than health insurance does). With that in mind, annuities, it could be said, are the primary financing mechanism for the new American Dream—not to get your own house or your own business, but to retire. For companies selling a huge amount of annuity business (and who isn’t?), the low rates are killing the ability to grow capital at the rate that matches the liabilities posed by all of the annuities that are out there. Both Asia and Europe are hitting alarm bells over the ever-widening gap between what insurers are obligated to pay their annuitants and what they have on hand to pay with. True, the industry got itself into this situation by taking on what has amounted to a very big long-tail obligation, but Bernanke’s efforts to keep things low are turning the single greatest drive for retirement in human history into the life and health industry’s version of the asbestos fiasco that has left noticeable scars on the property & casualty world. Don’t say we didn’t warn you.

(Dis)Honorable Mention

Jon Corzine

Jon Corzine for driving MF Global into bankruptcy and further weakening confidence in the investor system. Really, you should never double down like that with other people’s money. You’d think a guy like Corzine would have known, especially given the things he was investing in. We figure he’s a shoe-in for voting the euro in as a rogue. He didn’t make the list because his impact on the life and health industry is too indirect. He’s clearly a rogue to the financial services industry at large, and honestly, the guy should be forbidden from futzing with the investing world in general. He’s been involved in at least two major financial disasters (let’s not forget his role in the Long-Term Capital Management failure) and anybody whose fingers are this dirty is just going to make a mess wherever he goes.

No. 4 Sen. Jay Rockefeller (D-WV)

Jay Rockefeller

Sen. Jay Rockefeller (D-WV) for his role in championing the Medical Loss Ratio provision of PPACA, perhaps the single most contentious portion of the legislation so far for the industry (even more so than the ideologically challenging individual mandate). The industry’s problems with the MLR are legion, and they fed into the NAIC’s landing on this list, earlier. But Rockefeller ranks higher because he has been a strong backer of this, even though there are insurers who operate at MLRs that are even lower than the mandated 80%, which raises a weird specter of having to issue rebates to folks because of a law that is meant to keep insurers from gouging them. Instead, insurers themselves got gouged, which is a strange case of “turnabout is fair play” by any objective standard. To be fair, plenty of insurers are not so thrifty, and the notion of profiting from the delivering of health care is not just some disruptive meme that got into the head of liberal lawmakers. It has been an obvious gripe of the public ever since managed care became the primary mechanism through which anybody got to the doctor’s office. So while the MLR is yet another piece of flawed rule-making, it seems less like overt warfare against insurance and more like an effort to use both carrot and stick to get the industry to deliver more cost-effective service to the public. Still, you wouldn’t think that from the small health insurance agencies that have very real fears about going out of business as a result of the MLR. Is getting rid of mom-and-pop insurance operations really what PPACA is all about? We think not, and we are reminded of what the road to Hell is paved with.

(Dis)Honorable Mention

unemployment

High unemployment for the pressures it is putting on employee benefits providers, sales of individual life insurance and financial planners. An amorphous rogue, to be sure, but its shadow extends over everything, especially for younger consumers who are having trouble finding good work, moving out of their parents’ homes, and starting families of their own. In fact, there is an entire generation that seems to be several years behind the financial growth of the generations that preceded it. It didn’t make the list because in the long run, the weak economy isn’t so bad that it can really take the blame for all of the industry’s woes. An inability to afford life and health products is routinely cited in low numbers for things such as individual life insurance, but there are other factors that are much more important, such as consumer education and industry reputation.

No. 3 Occupy Wall Street

Occupy Wall Street

Occupy Wall Street for fueling misperceptions about the financial services sector. The anger and angst of the protesters can be understood easily enough; with high unemployment and a global economy still trying to shake off damage done by the excesses of Wall Street subprime trading, there seems much to protest. But drum circles formed by college grads who seem to feel that they were obligated to take on student loans does not elevate a much-needed conversation on how financial services need to be regulated. Instead, it only is adding an amorphous grassroots anger bound to be seized upon by presidential candidates in 2012, distracting us from getting any real work done on financial problems. OWS’ social media profile is also helping to distort reality when its supporters flock to Facebook and Twitter to show videos of police in New York clearing out Zuccotti Park and declaring that America has become a police state. Um, no. Some of us have actually visited actual police states, and the last thing they let anybody do is walk around in public shouting into a bullhorn about it. This collective dumbing-down of both our political problems and our powers of protest merely brings the signal-to-noise ratio of the national political discourse to an all-time low when we can least afford it. We are coming off of the passage of landmark healthcare reform and financial services reform that really do change quite a lot of things for quite a lot of people. When you get a bunch of wannabe anarchists and Che Guevara groupies getting media time to spread their non-message that the world is unfair, it would be nice to think that such blather ultimately will dissipate into the ionosphere. But politicians are an opportunistic bunch, and how better to placate the mob than to beat up legislatively on perceived bad guys with little public support? And who would those “bad guys” be, you ask? You already know the answer.

(Dis)Honorable Mention

Betty White

The silver tsunami for pushing the entire industry into a higher age bracket. Older clients, older producers, older workforces…they are all combining to put incredible strains on an industry that does not evolve quickly. The chief concern here is that with the first Boomers set to retire, we can also expect to see many of the agents who served them retire also. This spells a huge potential manpower gap that could leave the industry seriously understaffed and more importantly, under-skilled when it comes to selling to Generations X and Y. An added concern is that in this same time frame, we’re going to start to see if the industry can really live up to all of those guaranteed annuities it’s been selling. This didn’t make the list because all challenges contain great opportunities, and this is no different. The industry is already taking its recruiting needs seriously, and even if training budgets are not where they ought to be across the industry, there is a growing understanding not just to bring more talent in and give it career system-level nurturing, but the veterans in the home stretch of their careers are ideally suited to mentor a whole new generation of talent in ways that no formal training program ever could.

No. 2 Rep. John Boehner (R-OH)

John Boehner

Rep. John Boehner (R-OH) for leading a futile effort to overturn PPACA with the idiotically named Repealing the Job-Killing Health Care Law Act. (When will Washington stop trying to pass bills that either are either named after a hamfisted thesis statement or are some kind of tortuous acronym to fit a word people like to hear?) The repeal effort was never anything more than a grand symbolic gesture that had nothing to do with actual governance and everything to do with politics. And while it succeeded in the House, which has devolved into the Congressional equivalent of the kid’s table at Thanksgiving, it never had a chance to succeed in the Senate, and Boehner knew it. More to the point, even if it did somehow pass the Senate, Obama was sure to veto it, and there was never even close to enough support to overturn a veto. It was grandstanding, which serves a political end, sure, but the real battle over PPACA is not political. It is judicial (as the Supreme Court hears arguments on the individual mandate) and it is administrative (as implementation of PPACA is where the rubber will meet the road on all of this). Meanwhile, Boehner carried on in his obstructionist charge on the federal debt limit over a routine credit ceiling raise (something approved numerous times in recent decades, including the Reagan, Bush and Bush administrations) that spurred, at least in part, a national credit downgrade. This is part of a larger strategy to stand against anything Obama and the Democrats want on general principle, as seen on Congressional deadlock over legislation that many in the GOP might have supported under the Bush administration. The backside to this is that when all you do is stand against something, you’re not really standing for anything, either. Should Obama win re-election, the GOP and Boehner ought to take that into serious consideration.

(Dis)Honorable Mention

euro

The euro for its wobbly status and fears of contagion, which have made the world financial markets about as calm and steady as a swimming pool-sized bowl of Jell-O. Despite critical concerns over how Greek default concerns would spread to other troubled economies such as Italy, Spain and Portugal—all too large to be bailed out by Germany—the Eurozone ultimately rallied and came together to put its financial house in order. The euro didn’t make the list because in December, economists predicted the Eurozone would enter six consecutive quarters of recession, which will be brutal for Eastern Europe, but is bound to improve things for the dollar, and the American economy, which is on a slow road to recovery already. It might also help Obama get re-elected, which come to think of it, more than a few of our readers won’t see as a good thing at all.

No. 1 Verus Financial, LLC

cemetery

Verus Financial, LLC for the mercenary way in which it went about selling its services to cash-strapped states, turning a legitimate regulatory issue—unclaimed life insurance monies—into a cynical treasure hunt at the industry’s expense. (Dishonorable mentions go to the attorney generals and controllers in the various states that went along with it, but especially those in California, Florida, New York and Delaware. We would name them all, but this magazine only has 64 pages.) At the heart of all of this is a serious issue: why is it that life insurers are making asymmetrical use of the Social Security Death Master File? It makes sense to apply it to annuitants to ensure that nobody is getting money they don’t deserve. That’s a no-brainer. But to not apply the same rigor to the payment of life insurance raises huge red flags to an already skeptical public and an opportunistic regulatory environment. While some industry critics point to the DMF asymmetry as proof positive that the industry really wants to drag its heels when it comes to living up to its financial obligations, others have a more plausible explanation: the industry suffers from dinosaur syndrome (the bigger the body, the smaller the brain), and maybe this is really yet another example of companies not being fully aware of what their various silos are up to. It would not be the first time. But in today’s business environment, perception and reality are rather close bedfellows, and for this problem to rear its ugly head on the heels of last year’s flap over retained asset accounts (a case where the industry really got an undeserved bad rap) shows an incredibly poor grasp of reputational risk management on the industry’s part. Still, the degree to which the industry let all of this happens pales before Verus and its cohorts, which took advantage of an industry inefficiency not to serve the public, but to line pockets. Whatever ultimately comes of this, let us not forget that there is not a single accountant at Verus nor a single regulator among the states who jumped on this bandwagon out of noble interests. This entire thing is a shakedown, pure and simple. That the industry kind of brought it upon itself is a separate matter.

(Dis)Honorable Mention 

Insurance protest

The entire insurance industry for even letting the Death Master File and unclaimed assets situation get out of hand in the first place. This is not the first time the industry’s operational inefficiencies have come back to haunt it, nor the first time the industry’s inner workings have been interpreted by the public to be something sinister. That insurers could have used a tool as vital and as out-front as the death master file in such an asymmetrical way really opened them up to a very avoidable problem. For as much as the industry says its greatest enemies are opportunistic lawyers and regulators, and a cynical public, the real enemy may very well lie within.