It's not often that you can secure the undivided attention of a roomful of technology executives and solutions providers, but that was the scenario last month during the keynote presentation at Insurance & Technology's Executive Summit (read the complete Summit report beginning on page 28). The speaker was William Lerach, chairman of the law firm Lerach Coughlin Stoia & Robbins, who is known for his aggressive prosecution of hundreds of securities class and stockholder derivative actions. At the Summit, Lerach didn't just inveigh against corporate greed - he effectively terrified men and women who have survived challenges such as Y2K, M&As, outsourcing and legacy system migration by spelling out the very scary implications of the burgeoning pension and benefit plans crisis.
"The Baby Boomers are hobbling into retirement, but their dreams will become a nightmare," Lerach warned. "The financial crisis is already upon us." Underfunding is rampant, he added, thanks to a combination of tricky accounting, unrealistic investment assumptions, the market downturn and political weakness. And the chances of staving off disaster are slim, he said, asking "What, if anything, can be done to avoid 'The Perfect Pension Fund Storm'? Pitifully little - we face an unstoppable tsunami." In fact, Lerach predicted, it's virtually inevitable that this country faces "a gigantic, massive tax increase on the next generation to pay for all this," which could result in "ugly generational warfare."
And it gets worse - there's the looming insurance distribution practices scandal, which Lerach predicted "will be the biggest financial scandal in history if we have anything to do with it." (See related article, page 22.) So, one subtext of the presentation: Don't expect to see any lessening of regulatory pressures, Republican election victories notwithstanding.
Despite Lerach's reputation for business (including insurance) bashing, the Summit attendees clearly understood that the bleak scenario he outlined is not just hype and could affect all of them personally. In fact, the insurance industry could benefit in some ways from the pension crisis if the industry effectively develops and markets retirement products to those Boomers who can afford them, Lerach acknowledged. Whether or not this responsiveness will be viewed as socially positive or rapacious scavenging could depend on how quickly the fear turns to anger.
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio