There was quite a bit of discussion in the media, among agents and at the carrier level about the news report this week regarding the possibility of improper reserving at some carriers. The knee jerk reaction, as is typical in the media, is that where there is smoke there is fire. Three carriers are named specifically, and there are thinly veiled references to additional carriers being involved. In another typical move, the news reports are very,  

very scarce on details.

The truth of that matter is yet to be exposed, but here is what I do know -

• None of your client's policies are in trouble.
• None of these insurance companies are in trouble
• Even if there is something to this, the carriers in question have a simple remedy - change the way they are reserving.

If the carrier does need to address this in some way, they will almost certainly pass the cost along to the consumer in the form of increased premiums on new sales. Some initial conversations have indicated that the price increase would be in the neighborhood of 1% at one carrier. Of course, this assumes that the carrier ends up needing to change their reserving practices at all. All we have at this point is a preliminary finding, and the discovery that the carriers are meeting the reserve requirements in a way that was not anticipated by the regulators.

That version of the story is a far cry from the headlines. If, however, you read the article, the fact that this is a preliminary finding that the regulators are still evaluating is clear. If you click through to the article from the Wall Street Journal, pay particular attention to the quotes from Therese Vaughn. In essence she indicates that some regulators feel that the more stringent reserve approach could result I excess reserves! Sounds to me like the actuaries don't even agree on this issue.

Which brings me back to the title of today's email. We need to keep in mind what the Wall Street Journal's primary business is - selling papers. You sell more when you have headlines that imply some sort of violation of regulations. The fact that nothing of the sort has been proven and that there is a "month's long deliberative process" that still needs to be completed is buried in the article.

So what the heck do we do in the field? Take a note from many of our medical professionals, and take the "watchful waiting" approach they frequently employ (much to underwriter's dismay in some instances!).

One last little comment: There has long been a "difference of opinion" regarding reserves between carriers selling Guaranteed UL products and those whose primary product is Participating Whole Life. Most of those carriers are based in NY, and there is a comment in the first article indicating that The New York DOI may have been one of the first to question these practices. Makes you wonder what is really going on here, doesn't it?

You can read the article in question here.

This one is an interesting read as well.