Along with warmer weather, sunny skies, cherry blossoms and swarms of tourists, April in Washington, D.C. also brings to our nation's capital the Independent Insurance Agents and Brokers of America's National Legislative Conference. This year, for the first time, the IIABA combined the lobby-palooza with its annual convention. As participants gathered to discuss issues, network, exhibit, attend workshops and meet with legislators, foremost on their minds were natural disasters, terrorism insurance, regulatory reform and tax reform.
Tom Minkler, Big "I" government affairs committee chairman, called regulatory reform of the insurance industry "the No. 1 issue" to discuss with members of Congress. "Nothing is more important for independent agents and brokers than who regulates you and how they do it," he said, and lawmakers are weighing several options for doing just that. The options include 1) reforming the current system via the NAIC and passage of various state and federal laws, 2) optional federal regulation of the insurance industry and optional federal charters for insurers, 3) mandatory federal regulation, and 4) the IIABA-endorsed State Modernization and Regulatory Transparency Act (SMART), which would revamp the state system by creating federal uniform standards--without a federal regulator.
"Local regulation works best, and a state-based system ensures a level of responsiveness for consumers and independent agents that cannot be matched at the federal level," according to Charles E. Symington Jr., IIABA senior vice president of federal government affairs. He cited a bill recently introduced in the Senate, S. 2509, that would create an Office of National Insurance, housed in the Treasury Dept. and headed by a commissioner appointed by the President. Recalling the federal government's response (or, rather, lack thereof) to Hurricane Katrina, Symington stated, "We do not want to create a FEMA to regulate the insurance marketplace." Symington also fears the dual state-federal structure proposed in S. 2509 would confuse consumers by regulating some products at the state level and others at the federal level, not to mention agents and brokers trying to understand and navigate both regulatory systems. Further, he said, federally licensed producers, brokers and insurers could operate nationwide, with no state-level regulation for many of their activities.
Minkler acknowledged the need for regulatory reform, but insisted federal regulation is not the best means to attain it. "We need licensing reform, rate freedom, competition, speed to market and uniformity. We can get all these things from SMART, if it's done correctly," he said.
Not surprisingly, flood insurance was another hot topic. John Prible, Big "I" assistant vice president of federal affairs, observed that the National Flood Insurance Program has reached "a point of crisis in both the House and the Senate." He said Congress is now considering The Flood Insurance Reform and Modernization (FIRM) Act of 2006, a bill designed to reform the NFIP and expand its borrowing authority. FIRM includes some of the measures the Big "I" recommended late last year in its 22-point plan for improving the flood program. William G. Stiglitz III, Big "I" president, confirmed that the organization supports increasing the maximum coverage limits for commercial and residential property and contents, offering optional additional living expense coverage for homeowners, expanding the mandatory purchase requirement, increasing funding for flood-map modernization, and slowly phasing in actuarial rates. Prible also noted that the Big "I" opposes any attempt by Congress to reduce commissions for agents writing NFIP policies.
On a related note, Stiglitz asserted that the claims system was not prepared for a disaster the magnitude of Hurricane Katrina and admonished companies to better prepare for future catastrophes by improving communications and ensuring that people and materials are in place to allow agents to pay claims quickly in the worst of times.
"Natural disaster risk is a national problem that deserves a national solution," said Brendan Reilly, assistant vice president of governmental affairs. Thus, he said, IIABA supports H.R. 4619, a bill that would create a federal backstop for natural and man-made disasters, encourage insurers to enter at-risk markets, and increase availability of homeowners insurance.
"The 2005 extension of TRIA was a top priority and a tremendous victory for our members," Reilly said, although he expressed doubt that markets will be able to handle the terrorism risk any better when TRIA expires at the end of 2007. He asked Big "I" members to encourage Congress to develop a long-term solution to protect the country's economic security against the threat of terrorism.
Reilly also outlined two timely tax issues and their implications for agents and brokers. First, he urged support for H.R. 4960, the Tax Fairness for Small Business Act of 2006, because it modernizes and shortens the depreciation schedule for intangible assets. Reilly explained that, for many small, service-oriented businesses, a customer list is an important asset, and its shelf life is shorter than is reflected in the current 15-year schedule. Thus, when an agency is bought or sold, its true value may be distorted. Second, Reilly called on legislators to make President Bush's 2001 and 2003 tax cuts permanent. Both cuts reduced individual tax rates, the alternative minimum tax and the capital gains tax, and the 2001 bill phased out the estate tax, also known as the "death tax," which Reilly claimed hurt small, family-owned businesses.
Stiglitz ended the conference on a positive note, announcing that Trusted Choice, IIABA's national branding initiative, had reached its agent-participation goal of 6,000--eight months ahead of schedule. He reported that 6,027 member agents and 33 companies were currently enrolled in the program.
From the June 2006 issue of American Agent & Broker • Subscribe!
