Industry Stews Over WSJ COLI Articles
Call it the “power of the press.”
A series of articles in the Wall Street Journal over the past year is having a significant impact on the legislative debate over corporate-owned life insurance, industry officials say.
Indeed, says Albert J. “Bud” Schiff, president of the Association for Advanced Life Underwriting, Falls Church, Va., the impact has been “dramatic.”
He says he believes Sen. Jeff Bingaman, D-N.M. was very heavily influenced by the WSJ articles when he introduced legislation last year that would tax proceeds from COLI policies covering employees who have not been with their employers for more than one year.
Schiff, who is president of NYLEX Benefits, Stamford, Conn., says he believes a number of members and staffers on Capitol Hill have been influenced by the articles.
One problem, he says, is that COLI is not well understood on Capitol Hill. AALU, he says, faces a major task of trying to educate members and staff on the rules surrounding the product.
Jack Dolan, a spokesman for the American Council of Life Insurers, Washington, agrees that the articles are helping to drive the debate.
The problem, Dolan says, is that the articles focus on events that took place many years ago, before the 1996 changes in COLI were enacted. “The product has been revised extensively by Congress,” he says.
All the anecdotes about alleged abuses, he says, come from the earlier period. The reporting, Dolan adds, reflects old issues and, unfortunately, is being misperceived as representing problems of today.
All the negative reporting, Dolan says, is having a “chilling effect” on a product that addresses real issues in the lives of businesses and their employees.
There has been a lot of communication with staffers on the tax-writing committees, Dolan says, to remind them of the changes they enacted in 1996.
At the same time, AALU and ACLI have been sending letters to the WSJ criticizing the articles, but so far only one ACLI letter has been published and that was about a year ago.
In a Feb. 19, 2003, letter, from AALU, which was not published, Schiff says a WSJ article entitled “Insurance–Profiting When Employees Die,” is misleading.
In addition to focusing on pre-1996 situations, Schiff says, the article ignores current practices.
“Industry practice for some time has been to obtain prior consent of employees, explain the reasons for the insurance, and let them know that the employer may keep policies in force after termination of employment,” the letter says.
The letter adds that the National Association of Insurance Commissioners adopted guidelines in 2002 recommending that states make the consent and notification practices uniform.