Crony Capitalism Is Coming to Your Retirement Planning

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As the country prepares to enter a third year of painful inflation, Americans are pessimistic about the state of the economy and bracing for a recession. Families are planning for their futures in the face of uncertainty and ever-increasing prices. Against this backdrop, big insurance companies, left-wing Biden administration bureaucrats and crony capitalist regulators are working hand-in-hand to target a major financial planning tool. If successful, this effort will further enrich the big insurers at the expense of retirees, families, and people who have suffered a tragic loss. 

As part of its endless expansion of the administrative state’s fight against free enterprise, the Biden Treasury department revealed a plan last year to penalize life insurance companies that offer affordable options to Americans planning for the future. These new rules, predictably, don’t apply to everyone – just some smaller companies competing against insurance giants like MetLife. The Biden administration is attempting to pick winners and losers in the life insurance marketplace, effectively telling Americans which plans they can and cannot choose to plan for their own financial security. 

They are doing it through legal gymnastics by enlisting the National Association of Insurance Commissioners (NAIC), a non-profit agency whose members are the top insurance regulators from each state. The NAIC is not a government body, but it effectively acts as one. When the NAIC makes a policy recommendation to its members, it is generally adopted by insurance commissioners with the weight of law, even though state legislatures were never involved. NAIC’s revolving door is crony capitalism at its finest. Regulators and insurance industry insiders go to work for NAIC, then churn back to insurance companies and state agencies where they play by the rules they wrote.  

At their last meeting in March, NAIC insiders discussed a 50% increase in capital charges on plans offered by certain companies, particularly companies owned by private equity investors. Biden administration bureaucrats and NAIC insiders have tagged these plans as high risk, even though they carry an A rating from analysts like Barrons and should be treated the same as other similar offerings. The big winners in this arrangement are, unsurprisingly, the major insurance companies whose competitors would effectively face a massive cash penalty under the new regulation. 

More than half of Americans have a life insurance policy. More people would certainly choose to purchase them if they had more options and lower prices: nearly 70 percent of people who hold these plans say they feel financially secure but less than half of those without a life insurance plan feel the same. For seniors, life insurance and annuities can play a central role in retirement planning and preparing for the loss of a loved one later in life. For families experiencing the sudden death of an income earner – particularly a primary earner – life insurance can be the only thing keeping them afloat while they come to terms with their loss. 

That makes the new penalties on life insurance an attack on seniors, retirees, and families. These plans are not a luxury, they are an essential financial planning tool that helps people pay their bills in a time of need. If costs go up, available offerings go down, just as they did in Europe when regulators tried this very move. The result was predictable and just what the Biden administration wants – those plans disappear from the market.

Insurance commissioners themselves are the last line of defense against this attack. The NAIC does not hold the power of law. Insurance commissioners, who are often appointed by and accountable to governors, have a responsibility to reject the proposed penalties and the crony capitalism that allows big insurers to line their pockets while seniors and families face higher costs and less security. The borderline collusion between big insurers, unelected bureaucrats, and regulators is bad for consumers and bad for the country. It must be stopped. 

Rick Manning is the President of Americans for Limited Government. 

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