By David Connell

John Garamendi, we hardly knew thee
While this will be a Kobe-free zone, "Media Watch" would be remiss if it didn't point out the insurance angle of the California recall. No, no Arnold jokes here, we're talking about the all-too-short campaign of perennial Democratic candidate and California Insurance Commissioner John Garamendi.

Garamenedi entered the race on Aug. 6 along with fellow Democrat, Lt. Gov. Cruz Bustamante—one of the coolest names in politics if you ask me. Both men entered on the bizarre platform of asking voters to vote "no" on recall, but then punch their names just in case.

Unfortunately, Garamendi couldn't last a week and, in fact, was a no-show for the Hollywood-style filing deadline on Aug. 10. The insurance commissioner was quoted in the Los Angeles Times blaming his lightening-quick turn around on the recall's less-than-staid atmosphere:

"This recall has become a circus," Garamendi said outside the secretary of state's office in Sacramento. "Every day that goes by, we move toward more chaos and further from serious contemplation of the fundamental reforms necessary to restore our governmental systems and the reputation of the state of California."

At least he'll have something to talk about at the next National Association of Insurance Commissioners meeting, and I'm sure that Californians have not heard the last of candidate Garamendi.

" My cash-value policy has returned an average of 5.5 percent a year for 17 years, all gains tax-deferred." —Humberto Cruz

Life settlements: wise investing or down right ghoulish?
Last month's "AT Asks!" poll on this website asked readers to weigh in on the uses of life settlements. While most poll respondents agreed that there are legitimate uses for life settlements, close to 15 percent believed they were totally unethical, a judgement that surprised some readers. These mixed feelings about life settlements were mirrored in some of the stories "Media Watch" found this month.

First, there was a story on SmartMoney.com titled "Better Off Dead," which was a response to an "anonymous" ("Media Watch" suspects bogus) question about the wisdom of investing in "viatical settlement with a guaranteed rate of return of 12 percent to 14 percent a year." The article goes on to say some pretty scandalous things about our friends in the life settlement business including this gem of an opening paragraph:

“If Count Dracula were the investing type, he'd probably be drawn to viatical settlements, which involve purchasing the life-insurance policy of someone who's terminally ill and waiting for that person to die. Not only is this creepy—it's a lousy investment, to boot.”

This sentiment could also be found in the Michigan paper The Grand Rapids Press, which detailed the sordid rise and fall of a life settlement company in an article grimly titled "Banking on Death, Investors Lose." While the story really centered on two ambitious—and perhaps crooked—partners who overextended their business then foolishly tried to cover it up with falsified financial documents and recover lost funds through shady real estate and telecommunications deals, it was the life settlements angle that seemed to catch the imagination of Press reporter Chris Knape.

“The idea was to collect money from life insurance policies without needing to die,” Knape begins breathlessly. “The sick would get cash—sometimes around 40 percent of the death benefit—to take care of their final days. Investors were guaranteed a return, sooner or later.”

Compare these purple-prose entries to the more measured coverage of life settlements in The Christian Science Monitor, which called them "the most innovative example on the insurance front."

“It allows policyholders to sell their life insurance to one of about half a dozen third-party companies called ‘funders,’ which often sell life insurance, too.” Monitor reporter Noel C. Paul writes. “Selling their policy lets consumers avoid paying further monthly premiums, while also allowing them to cash in on a percentage of the total value of their policy. If an individual sells a policy worth $500,000, for example, he or she might receive $210,000 in cash.”

Columnists lovin' life (insurance)
Maybe it's the humidity—more likely it’s generally lower insurance rates and studies from The Hartford and LIFE finding that Americans are seriously under-insured—but financial columnists are suddenly hot for insurance-based planning. Here's a quick review of what we found:

"Investing in Cash-Value Life Insurance."
Syndicated columnist Humberto Cruz points out the upside of cash-value, or permanent life insurance. Choice excerpt: "My cash-value policy has returned an average of 5.5 percent a year for 17 years, all gains tax-deferred. In addition—the most important part—the premiums have provided life insurance protection for my family."

"Insurance Industry Targets Seniors, But Beware of Risks."
USA Today columnist Sandra Block highlights aging Americans as a growing market for term life insurance, but warns that outliving the term could cause premiums to sky rocket when it comes time to renew. Choice excerpt: "Some older Americans have big responsibilities too. You may want to consider a term policy if you want to provide security for dependent grandchildren (or) … you want to provide financial security for a younger spouse.”

"Simple Answers for Difficult Times."
The Washington Post finance columnist Michelle Singleton has a monthly book club, this month's selection is Ric Edleman's What You Need to Do Now: An 8-Point Action Plan to Secure Your Financial Independence, which preaches the basics of financial planning. Choice excerpt: "Do you have disability insurance? Admittedly, this insurance can be costly.” But as Edelman points out, “If you can't afford the premiums, how will you be able to afford the loss of income that results from being disabled?'"

"Corporate Life Insurance Policies Aren't Unusual."
New York Newsday columnist Carrie Mason-Draffen sets the record straight on COLI. Choice excerpt: "The policies aren't unusual (New York State Insurance Department) spokeswoman Joanna Rose said. And, yes, companies use them to help fund employee benefit plans. When an employee dies, the company receives the death benefit, which helps pay for the employer's portion of a benefit program."

Am I missing something? Did you read an essential story on investor confidence? Is Law and Order sticking it to the insurance industry again? Have you read a book that deals with the financial services industry? Is this a poorly written column and a disgrace to the industry? Sound off on "Media Watch" by emailing your thoughts to David Connell.

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