Thursday, September 27, 2007

LOMA and LIMRA to merge, subject to member vote

The boards of LOMA and LIMRA have decided to merge the two organizations.

Tuesday, September 11, 2007

September 11

Sometimes, we let the day-to-day struggles of our work get in the way of remembering why we're here, and what we do. On this day 6 years ago, we turned on our televisions in the morning, and we saw unspeakable horror. We simply could not understand how someone could actually do something like that, and we couldn't imagine what our lives would be like going forward. We were, as a nation, possibly more unsure about our own future than we had been in my lifetime.

That's why we're here. That's what we do.

We provide certainty. We provide guarantees. We provide protection. We, the life insurance industry, make it possible for a man to look his child in the eye, tell them that everything's going to be all right, and go off and be a hero knowing he's done all he can to provide for his family.

So as you go through your day today, doing your usual things, dealing with your typical frustrations, please remember... our job is to make someone's worst day just a little better. It's admirable work, and it's very important, and only we can do it.

Wednesday, September 5, 2007

The Optional Federal Charter

These days there is a lot of discussion about the potential implementation of an optional Federal insurance charter. It would allow insurance carriers to opt-in to regulation at the Federal level, and free them from the constraints and restrictions of attempting to comply with up to 50 unique state regulations.

For many carriers, this could dramatically simplify operations. No more state-specific requirements for products, pricing, print, and systems. You would have to believe that the cost of doing business nationwide would be a fraction of what it is today, for many carriers, if they properly take advantage of the opportunity.

State insurance commissioners, predictably, are strongly opposed. They argue that they provide a valuable service to their constituents by protecting them from manipulation and predation by potentially unscrupulous insurers.

From the systems perspective, I think that state-specific regulations are a huge barrier to bringing a new enterprise system to market. You are forced to build enormous flexibility into a world-class system, so that you can try to bring some sanity to the world of 50-state compliance. If you fast-forward to the day when most carriers are chartered at the Federal level, all of that development can be eliminated, and the developers can focus on insurance product features, where the focus belongs.

So, the key question is this; do the state commissioners provide a valuable service, or simply introduce a level of bureaucracy that results in higher premiums for everyone? My gut tells me that it's possible that state regulation has outlived its usefulness, and the writing may be on the wall.

Tuesday, September 4, 2007

Interest rates, and the insurance industry

This morning, Merrill Lynch downgraded a bunch of large-cap banks and said that there is a 60% chance of a recession. And in response to this...

The market's up. Pretty substantially, too. So what gives? You'd think that with all of the liquidity concerns, a wholesale downgrade of banks would be taken as bad news.

That's the problem, though. I think the market is buying on bad news, in the hopes that bad news will spur a rate cut by the Fed. I've heard predictions of 50 basis points, and hopes of 100 basis points.

Cheap money's great, don't get me wrong. However, I don't think it's the Fed's job to try to stabilize the stock market, or the housing market. Using interest rates as a tool to control across-the-board price inflation is one thing; micromanaging individual components of the economy that are correcting, or overbought, is another thing altogether, and it's not a good thing.

Especially for us in the insurance industry. Carriers are limited in their investment options. They're also not necessarily as efficient as they could be, often due to substandard backoffice technology and a reluctance to upgrade. Combine that reluctance with a drain on surplus, and you have a recipe for more of the same headaches for carriers - headaches they've been living with pretty much since Y2K.

Let's hope that the Fed does the right thing, and keeps the rate where it's at in two weeks. The market will sell that day, but in the long run, we'll be better off.