Compromise On Group Life In Terrorism Bill Is Welcome

While not perfect, the compromise on group life insurance contained in the terrorism insurance legislative agreement is probably the best anyone could have expected.

The compromise mandates a study of the need for a federal backstop covering group life insurance. Depending on the results of the study, the Secretary of the Treasury is authorized to extend federal assistance to the group life business without the need for another vote in Congress.

This falls short of what advocates of including group life wanted, and it obviously leaves a gaping hole in the market if an attack occurs between now and the time that Treasury completes its study.

Nonetheless, including group life insurance in the legislation directly was always a long shot, so this outcome is not too bad, all things considered.

For one thing, the effort to include group life in the bill got off to a late start. Initially, the life insurance industry asked only for a study of the impact of another major terrorist attack on the industry.

The industry, as a whole, was not even asking Congress to vest authority in the Treasury Secretary to include life insurance under the program.

Both the House bill, H.R. 3210, and the Senate bill, S. 2600, contained such a provision and that seemed to be the end of the matter.

The effort to include group life directly in the legislation really gained steam only after both bills were passed and House and Senate conferees began wrangling over how to reconcile them.

It is always difficult to get conferees to include a significant provision in the compromise bill that was not contained in either the House or Senate versions.

Moreover, the life insurance industry was significantly divided on this issue. While some group life companies saw their reinsurance programs dry up, and believed a federal backstop was vital to maintain the viability of the business, others werent so sure.

These companies managed to put together reinsurance programs and saw a federal program as unnecessary. Indeed, some of these companies felt that a federal program would deprive them of a competitive advantage.

Congress is always reluctant to put itself in the middle of an intra-industry battle. The inability of the group life industry to speak with one voice undermined the prospects for inclusion as much as anything did.

Finally, there were growing concerns on Capitol Hill that the legislation was getting out of hand. Many powerful members of Congress believed that the insurance industry wanted the federal government to step into market at a very low level of losses and across too broad a spectrum of coverages.

They wanted the scope of federal involvement to be as narrow as possible. Indeed, it should be noted that in addition to group life, personal lines property-casualty insurance was left out of the package–a decision that has rankled the p-c industry.

Considering the circumstances, the advocates of including group life in the package did well. They deserve congratulations.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 4, 2002. Copyright 2002 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.