The Independent Insurance Agents & Brokers of America (the Big “I”) will again confront a number of legislative issues important to agents and brokers at both the state and federal levels in 2007, including progress on licensing, regulatory, tax and legal reforms, incentive compensation, flood and disaster legislation.
The legislative agenda for the nation’s largest insurance association in 2007 includes the following items:
The Big “I” wants all jurisdictions to issue and renew producer licenses on a truly reciprocal basis and to implement uniformity in key areas. Many states claim to have enacted reciprocity and other reforms in the early part of the decade, but that reform effort has not produced meaningful results for many agents. The Big “I” supports targeted federal legislation to streamline the licensing process and to implement uniformity.
One of the association’s key objectives is to address the requirements in many states that force an insurance agent to obtain three licenses (an individual license, an entity license, and a corporate registration) before placing business in a particular jurisdiction. These duplicative requirements impose significant and unjustified costs on producers, hinder an agent’s ability to serve customers, and are a likely violation of state and federal law. The Big “I” is also developing a targeted list of reforms that will make the licensing process simpler for multi-state producers.
“Agents and brokers in today’s regulatory environment face imposing licensing burdens, and our members continue to struggle with the needless logistical and bureaucratic hurdles that are in place,” says Wesley Bissett, Big “I” senior vice president for government affairs and state relations. “Insurance producers across the United States are frustrated by the current system, and they understandably want ease, efficiency, and speed in the licensing and renewal process. Significant reform is urgently needed and is long overdue.”
Very few states enacted any legislation in this area in 2005 and 2006, and very little legislative activity — if any at all — is expected in 2007. The educational efforts undertaken by the Big “I” in recent years have been well-received by state legislators and helped prevent knee-jerk policy responses in the wake of the Marsh scandal, and, predictably, no state has banned the payment of incentive compensation. The Big “I” is concerned, however, that some attorneys general are usurping the authority of state regulators and legislators and using legal settlements as vehicles for imposing costly and unnecessary requirements and altogether banning forms of legal incentive compensation.
“As advocates of effective insurance regulation, the Big ‘I’ strongly objects to the manner in which some attorneys general have strong-armed insurers into accepting settlement agreements. Insurers need to determine how to compensate producers for sales and service excellence,” says Debra Perkins, Big “I” executive vice president and general counsel.
Insurance Regulatory Reform
The Big “I” will continue to strongly support targeted federal legislation, or “federal tools,” to reform the current state-based regulatory system without creating a federal regulator or “optional” federal charter.
“Targeted reforms would retain the strengths of the existing system while improving it in the areas where it is sorely needed. The surplus lines bill was a great first step, and we hope to take the next steps in 2007, particularly in the areas of producer and company licensing. We look forward to working with the leadership in the House Financial Services Committee and the Senate Banking Committee as they continue their important work on insurance regulation,” says Charles E. Symington, Jr., Big “I” senior vice president for government affairs and federal relations.
With the Terrorism Risk Insurance Extension Act (TRIEA) set to expire on Dec. 31, 2007, renewal or extension of a federal backstop for catastrophic terrorist acts is a top priority of the Big “I”.
“We believe that the uncertainty involved in potential terrorist attacks will continue to make such events effectively uninsurable in the coming years, and as such, we believe that a federal backstop is necessary to prevent significant economic disruption,” Symington says. “We are very heartened with the recent comments by the new committee leadership in the House and the Senate who have indicated that this issue is a leading priority, and we will work closely with legislators, policyholders and companies to ensure that some form of a program remains in place after this year.”
Flood Insurance Reform
The Big “I” was very pleased with the Senate Banking Committee action and House passage of the Flood Insurance Reform and Modernization (FIRM) Act in 2006, and remains committed to comprehensive reform of the National Flood Insurance Program (NFIP).
“The Big ‘I’ has been a leader in flood insurance reform, and an example is the comprehensive reform package we proposed in November 2005,” Symington says. “The new leadership in the House and Senate have indicated flood insurance reform will be a priority, and we will continue to push for needed reforms that will help ensure the solvency and effectiveness of the National Flood Insurance Program for many years, and also help consumers by providing new levels of coverage, such as business-interruption insurance, increases in the maximum coverage limits, and the inclusion of additional living expenses coverage for residential policies.”
Natural Disaster Legislation
The active hurricane season of 2005 and the subsequent constraints in the insurance market reiterated the need for comprehensive natural-disaster legislation in Congress, and the 109th Congress considered four bills on the subject, including two general approaches: the creation of a federal reinsurance program and the ability of insurance companies to set aside tax-free reserves for certain catastrophic risks.
“We will support any solution that allows our members to serve consumers with natural disaster coverage, whether that means a federal backstop, tax-free reserving, catastrophic savings accounts (CSAs) or some combination approach,” Symington says. “Additionally, we strongly support legislation introduced in the Senate by Sen. Bill Nelson (D-Fla.) and in the House by Reps. Debbie Wasserman Schultz (D-Fla.) and Patrick McHenry (R-N.C.) that would establish a commission to help the federal government prepare for and manage natural disaster exposures. We will work with all parties in the insurance marketplace to reach consensus on a viable solution to address this national problem.”
This will also continue to be an important issue at the state level, as many states are expected to consider catastrophe-related issues. As in 2006, states are likely to look at such issues as enhanced building codes (and the enforcement of such codes) in disaster-prone areas and other ways to promote mitigation before catastrophes strike. Continued debates are expected on the need for state or regional catastrophe funds, modeled after similar funds in place in Florida and California. State regulators and the National Association of Insurance Commissioners (NAIC) have been active participants in the state and federal debate and will play an important role once again in 2007.
“The Big ‘I’ continues to support legislative and regulatory efforts that return insurers to at-risk regions, restore and preserve healthy competition, encourage mitigation and effective planning, as well as other important steps to prepare communities across America for future natural disasters,” Bissett says. “We will actively promote these vital policy debates and discussions in 2007.”
Independent agents and brokers will continue to oppose federal funding for Premium Reduction Plans (PRPs). The Big “I” advocated for and Congress agreed to the defunding of this program in 2006 because of various issues with PRPs that are contrary to the best interests of consumers. The United States Department of Agriculture’s Risk Management Agency (RMA) published an unprecedented interim rule allowing providers to give rebates to their customers, a provision at odds with the laws of 48 states and longstanding Federal Crop Insurance Program (FCIP) regulations prohibiting rebating.
Additionally, PRP rebating would allow for rebates to be offered to farmers in some states but not others, contrary to FCIP regulations disallowing discrimination in favor of farmers in any state at the expense of farmers in other states. The funding prohibition of PRP was successfully extended in the recent Continuing Resolution passed at the conclusion of the 109th Congress, and we will work with the leaders of the 110th Congress to continue this prohibition of PRP and to eliminate the plans altogether.
“PRP schemes would force insurance providers to focus on shortcuts rather than on providing reliable, quality service for farmers,” Symington says. “We will continue to fight against these types of schemes to prevent a race to the bottom among insurance providers, which would create subpar service for farmers all over America.”
The Big “I” supports S. 3974 and H.R. 4960, introduced in 2006, and will seek to move that legislation forward in 2007. The bills would amend the current tax code to allow a more accurate depreciation schedule for intangible assets, such as customer lists, when they are acquired in the purchase of small businesses, and to allow purchasers of eligible small businesses to write-off as much as $5 million of purchased intangibles over a five-year period, with ratable depreciation over 10 years. S. 3974 was introduced by Sens. Jim Bunning (R-Ky.) and Sen. Kent Conrad (D-N.D.), and H.R. 4960 was introduced by Reps. Eric Cantor (R-Va.) and Earl Pomeroy (D-N.D.).
“We are very grateful to Sens. Bunning and Conrad, and Reps. Cantor and Pomeroy, for their work in getting these bills introduced last year,” Symington says. “Tax reform will help our members and thousands of other small businesses grow their businesses, hire more employees, and pass on their agencies to their families when they decide to retire. We will continue to support this legislation and help move it forward this year.”
Independent agents and brokers will continue to push for legislation that will address this issue while making sure any national standard is not burdensome, and enforcement of the standard is done primarily through state insurance regulators. “We also will work with carriers and vendors through the Agents Council for Technology and other advocacy outreach to assure that any new legal or regulatory requirements are implemented in ways that do not interfere with agency efficiency or necessitate inconsistent work flows for different carriers,” Perkins says.
Health Care Reform
Independent agents and brokers will continue to seek increased access to health insurance to help the uninsured obtain the coverage they need. The Big “I” was heartened by enactment of the Tax Relief and Health Care Act of 2006, which includes a number of provisions designed to improve the operations of Health Savings Account (HSA) plans, and we look to build upon this legislation in the coming year.
“We still face a situation in which 45 million Americans have no health-care coverage, and a solution is absolutely needed,” Symington says. “We will support legislation providing expanded health-care options, not just for the good of our members, but for all Americans.”
Was this article valuable?
Here are more articles you may enjoy.