| VARIABLE
ANNUITY ABUSE – Unfortunately, you can look for reports in this arena
to grow. The NASD and the SEC have released a joint report claiming that
many purchasers of variable products (life and annuities) did not understand
what they were buying, or that the products were inappropriate for their
investment objectives. The report, Joint SEC/NASD Staff Report on Examination
Findings Regarding Broker-Dealer Sales of Variable Insurance Products (at
http://www.nasdr.com/white_paper_0600804.asp
and http://www.sec.gov) identifies both
"sound" and "weak" broker-dealer practices in the areas of sales suitability,
disclosure, supervision, training and records maintenance. The SEC also
issued an alert to remind investors that variable annuities are not suitable
for all consumers, especially investors who need the money in the short
term or who borrow against their home mortgage in order to purchase a variable
annuity or variable life insurance product.
SILICA? SAY IT AIN'T SO,
JOE - Worrying that silica exposure could produce the kinds of litigation
and insurance problems that asbestos has, Standard & Poor's Ratings
Services is keeping a close eye on developments as they unfold. "The parallels
to asbestos are of concern to us," warned John Iten, credit analyst and
director in Standard & Poor's Insurance Ratings sector. The similarities
are apparent from both health and legal standpoints. As more and more lawsuits
are filed over silica exposure, they are likely to mirror the asbestos
trend, with litigation reaching beyond the silica manufacturers to industrial
users, manufacturers of respirators, and even retailers. Because so many
industries use silica and because of the long latency period for developing
health problems from exposure, the number of potential defendants and claimants
is huge.
FED WILL HIKE RATE
– It seems almost certain that the Federal Reserve will soon be raising
the federal funds rate above the current 1%. Major reason is not a strong
fear of immediate inflation, but rather to protect the federal fund rate
as a tool to fight potential inflation. Insiders say we should not be concerned
about "a string of rapid-fire increases like those that shook markets in
1994."
JOIN THE CLUB - MetLife,
Aetna and Cigna have been subpoenaed by New York Attorney General Eliot
Spitzer in his probe of arrangements between insurers and brokerage firms.
More specifically, Spitzer is investigating contingent commissions and
placement service agreements, under which brokers receive additional pay
from insurers for steering business to them. These companies join
insurers Hartford and Chubb and brokerage firms Marsh & McLennan, Aon
and Willis Group Holdings, which have also received subpoenas in the probe.
NO RESPECT – Apparently,
NY Attorney General Eliot Spitzer is suffering from the Rodney Dangerfield
syndrome. Despite his successful pursuit of financial wrongdoing in several
industries and policing of the financial markets, it does not appear to
be helping him in a possible bid for the New York governor's office in
2006.
SLOWING BUT STILL HIGH
- According to a report by the Center for Studying Health System Change,
the pace of growth in medical costs eased in 2003 to 7.4%, from 9.6% in
2002. That rate of increase, however, is still more than double the
rate of overall price inflation. The report concludes that "health
costs are rising at a rate that employers will not continue to bear in
the long term." In another study, Hewitt Associates reports that
HMOs are proposing an average premium increase of 13.7% for 2005.
However, negotiations between employers and HMOs, as well as cost sharing
with employees, may result in actual price increases in the single digits.
INSURERS ASK FOR TRIA
EXTENTION – American Insurance Association (AIA) and member companies
have asked the Treasury Department to urge Congress to extend the Terrorism
Risk Insurance Act (TRIA) for at least two years beyond its Dec. 31, 2005
expiration. "Insurance is a key element of national economic security,
and a catastrophic terrorist attack remains uninsurable. If Congress fails
to extend TRIA this year, we will return to the same kind of marketplace
uncertainty and instability that prompted the law's creation in the first
place."
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|
EXECUTIVE LIFE LIVES
– A problem that appears to have an endless life...the California Department
of Insurance has received $110 million on behalf of 330,000 former policyholders
of insurance sold by Executive Life. The money is part of a settlement
won by the U.S. Department of Justice in the criminal fraud case against
Credit Lyonnais and various other French corporations and individuals.
FYI, that works out to about $333 per policyholder.
STRONG JOB GAINS -
The unemployment rate for May held steady at 5.6%, but the Department of
Labor reports that the economy created a surprisingly high 248,000 jobs
in May.
HARTFORD RESCUE -
Hartford Life has agreed to assume 6,000 immediate annuities and $1.5 billion
in deferred annuities from London Pacific customers, pending North Carolina
Supreme Court approval. Hartford remains in negotiations to assume 2,000
universal life insurance policies from London Pacific customers.
MENTAL HEALTH BARRIERS
- Nearly half of Americans have had someone in their household seek mental
health treatment, but most still perceive cost and lack of insurance coverage
as barriers according to a poll by the American Psychological Association
(APA). The poll also shows that stigma about seeking mental health treatment
is increasingly less of a barrier to getting treatment. Only 30% of Americans
say they would be concerned about other people finding out if they saw
a mental health professional and only 20% believe there is any stigma associated
with therapy.
CLASS ACTION AGAINST MUTUAL
BENEFITS - The Law Firm of Geller Rudman appears to be the first to
initiate a class action lawsuit on behalf of all persons who invested in
the settlement company Mutual Benefits Corporation (MBC). The law firm
listed a slue of defendants, including "deep pockets" like Citibank and
Union Planters and claims MBC promised investors guaranteed, fixed rates
of return ranging from 12% to 72%.
OUTSOURCING...DOMESTIC
AND FOREIGN – The Labor Department reports that 9% of non-seasonal
U.S. layoffs in the first quarter were due to outsourcing, but less than
a third of the work was sent overseas.
LIFE SETTLEMENTS AND CONSUMER
RIGHTS - Governor John Elias Baldacci has signed legislation that authorizes
and regulates life settlements in the state of Maine, assuring the consumer's
right to realize the fair market value of unwanted or unneeded life insurance.
The sale of a policy to a third party was previously available only to
policyowners who were chronically or terminally ill. |
