Industry Ponders Impact Of Court Ruling Blocking FTC's Do-Not-Call Rule

"We will continue to monitor the situation and will take whatever legislative action is necessary to ensure consumers can stop intrusive calls from unwanted telemarketers," they add.

While the impact of the courts decision is still being determined, the American Council of Life Insurers, Washington, is raising concerns over a proposed rule change by the National Association of Securities Dealers aimed at implementing the FCCs do-not-call requirement regarding broker-dealers.

The issue involves what constitutes a "business relationship." Under the do-not-call regulations, broker-dealers are allowed to make solicitations to individuals with whom they have an established business relationship.

Under the proposed NASD rule, a business relationship is deemed to exist if the customer made a financial transaction with the broker-dealer up to 18 months prior to the telemarketing call, or if the customer has contacted the broker-dealer about a product or service up to three months before the call.

Moreover, NASD says that the receipt of interest or dividends does not constitute a financial transaction establishing a business relationship.

Carl Wilkerson, ACLIs chief counsel for securities, says the NASDs definition does not properly accommodate the interests of broker-dealers distributing variable life insurance and variable annuities.

In a letter to the Securities and Exchange Commission, Wilkerson says that because of the long-term nature of life insurance products, life insurers by necessity have long-term business relationships with customers.

Life insurers, he says, must have the ability to communicate with customers if changes in laws or regulations impair the customers status or estate, retirement tax or financial planning objectives.

"While the three-month and 18-month triggers in the proposals definition of established business relationship may make sense in securities and banking transactions, they apply poorly to the insurance characteristics of variable contracts," Wilkerson says.

"The application of these time limits to ongoing, long-term life and annuity contracts would create profound burdens for life insurers and their customers," he says.

NASD, according to Wilkerson, can solve the problem by stating that variable life insurance and variable annuities are long-term contracts fulfilling the definition of established business relationship while the contract is in effect.

In addition, he says, NASD should state that the payment of interest and dividends in connection with insurance and annuity contracts is a financial transaction.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 26, 2003. Copyright 2003 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.