Push For More Tax Revenue From Life Insurers Seems Unlikely Now
Its looking less and less likely that life insurance products will be targeted as revenue raisers by Congress this year.
Two industry lobbyists, both of whom asked not to be identified, say the atmosphere on Capitol Hill has changed completely in the wake of the national tragedy that struck on Sept. 11.
Prior to the terrorist attack, they agree, the rapidly eroding non-Social Security surplus was setting the stage for an intense partisan battle over where to find revenues to pay for government appropriations.
In particular, they say, there would have been a bitter political conflict over any suggestion by the Bush administration that the Social Security surplus, the so-called “lock box,” be tapped to pay for non-Social Security spending.
But all that has changed now. The lobbyists agree that in the wake of the terrorist tragedy, there is a new bipartisan spirit on Capitol Hill, and a general agreement that the Social Security surplus will be used to create an economic stimulus package and pay for government appropriations.
Indeed, they say, they expect Congress to put together an omnibus appropriations billthat is, one major bill subject to a single up-or-down vote instead of separate votes on every element of government appropriationsand then get out of town.
There very likely will not be any revenue raisers in this omnibus approach.
The lobbyists cite two reasons for this. First, they say, Congress wants to maintain unity during a time of national crisis and possible armed conflict. Anything controversial will be put to the side.
Second, they say, Congress is genuinely concerned about the insurance industry, which is working to resolve claims arising from the terrorist attacks.
Although there is no reason to believe life insurers will not be able to pay claims, they say, Congress is not likely to add to the industrys financial burdens at this time.
Before Sept. 11, one lobbyist says, the expectation was that Congress would be in session into December. But now, he says, it looks like Congress may adjourn by mid-October.
Regarding the Sept. 11 terrorist attack, the American Council of Life Insurers, Washington, is examining whether some modest federal legislation might be needed as insurers work to pay claims.
Jack Dolan, a spokesman for ACLI, says that first and foremost, the life insurance industry is financially strong. It does not need any assistance from Capitol Hill to pay death benefits.
There are some legal issues on the table, however, that could arise as life insurers work to pay claims promptly, Dolan says. Life insurers are working with regulators on these issues, he says, and are still evaluating whether federal legislation might be needed.
Dolan emphasizes that the industrys concerns are “non-emergency.”
One issue, he says, involves a death certificate, which is required under most state laws for life insurance claims.
Life insurers, Dolan says, are using other means as a basis for establishing death in order to pay claims promptly. These include relying on affidavits from spouses and using passenger lists from the downed planes and employment records of those who worked in the World Trade Center, he says.
But life insurers want to be sure they will not face any liability down the road by resolving claims in this manner, Dolan says.
In addition, he says, life insurers do not want to set a precedent. After the claims arising from the tragedy are resolved, he says, life insurers will return to the normal means of doing business, which involves requiring death certificates.
Another issue could arise if there is any uncertainty over the beneficiary, according to Dolan. Life insurers may have to pay the benefit to the estate, he says.
Again, Dolan adds, life insurers do not want to face liability if that happens.
Dolan emphasizes that it is not certain whether federal legislation is needed. Industry lawyers are still reviewing the issues.
Meanwhile, the House Financial Services Committee is gearing up to examine the performance of insurance companies in response to the tragedy.
In a letter to Kansas Insurance Commissioner Kathleen Sebelius, who is president of the National Association of Insurance Commissioners, Committee Chairman Mike Oxley, R-Oh., and three colleagues ask for information both on claims payments and the solvency of affected insurers.
“This tragedy will likely result in the greatest loss the insurance industry has ever faced, both in terms of human life and monetary losses,” Oxley says in his letter.
“The ability and willingness of the industry to fulfill its obligations to provide compensation for the lost lives and the rebuilding of our country are absolutely critical,” he adds.
Oxley asks NAIC to assure that all contractual obligations are fulfilled in a timely manner.
He also asks NAIC to provide the committee with information on the financial health of the insurers with major claims obligations.
At press time, there was also the possibility that the committee would conduct hearings on the insurance industry, but nothing has been formally scheduled yet.
In addition to Oxley, the letter was signed by Reps. John J. LaFalce, D-N.Y., Richard H. Baker, R-La., and Paul E. Kanjorski, D-Pa. All are senior members of the committee.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 24, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.