The story from WSJ is that a number of large life insurance companies are using trickery to underreserve their policy obligations. Here’s the only blurb I’ll quote: “This is a very controversial issue, and there is a lot of emotion behind it,” said Mark Birdsall, an insurance regulator from Kansas.” http://online.wsj.com/article/SB10001424052970203707504577010211496055718.html
Suffice it to say that the insurance industry, in general, feels that it should be entitled to operate in total obscurity, and they’ve done a damn fine job of making sure that they have no federal oversight. Over many decades the industry has defeated attempts at federal regulation,instead preferring 50 jackleg state insurance commissioners who they can easily wine, dine, bribe and confuse. Naturally, many commissioners retire and take a job within the industry.
Also, keep in mind that the primary purpose of insurance regulation is not to keep rates low, but to keep reserves adequate. History shows that if left to its own devices, the insurance industry will sell policies which it has no intention of honoring. The industry has to be forced to reserve.
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