The life insurance industry will take its battle to preserve corporate-owned life insurance to the Senate Finance Committee this week and will support a new proposal by Sen. Kent Conrad, D-N.D., aimed at addressing what it sees as misperceptions about the product.
The Finance Committee will hold a formal hearing on COLI on Oct. 14, notes Jack Dolan, a spokesman for the American Council of Life Insurers, Washington, which will give the life insurance industry an opportunity to set the record straight on COLI.
Bob Plybon, president of the Association for Advanced Life Underwriting, Falls Church, Va., adds that the COLI language approved by the committee at an earlier sessionlanguage that was sponsored by Sen. Jeff Bingaman, D-N.M.would be devastating to the industry.
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The entire industryAALU, ACLI and the National Association of Insurance and Financial Advisorsis united in opposition to the Bingaman amendment, Plybon notes.
The life insurance industry, according to Plybon, does not believe there are the kinds of abuses in the marketplace that Bingaman believes exist.
There is, he says, a substantial misperception.
The language drafted by Conrad, Plybon says, will address those misperceptions.
The controversy surrounds a pension bill approved by the committee in September which was amended to include a severe COLI provision.
This provision would tax the death benefits associated with any COLI policy that covers employees who die more than one year after leaving employment.
Originally, the effective date of the provision was Sept. 17, 2003. However, the committee later agreed to change the effective date to the date of enactment of the legislation.
In addition, the committee agreed to hold a hearing on COLI, which it had not done prior to approving the Bingaman amendment.
After the hearing, the committee will hold another vote on COLI, where the Conrad language will be considered.
Dolan says that during the hearing, the industry will point out the fact that notice to and consent of the employees covered by COLI policies is the operating norm in the life insurance business.
In addition, he says, the industry will emphasize that insurance products help companies provide benefits to their employees.
Moreover, Dolan says, the industry will stress the extent of state regulation of COLI that already exists.
“The hearing provides an opportunity for us to make our case in a public forum and not be blindsided by press reports that offer little opportunity for presenting the full range of facts about COLI,” Dolan says.
Plybon adds that the Conrad amendment will address the misperceptions surrounding COLI without devastating the market.