Frank Keating has been president and CEO of the American Council of Life Insurers for only about nine months, but he is already earning his stripes.
The former governor of Oklahoma admits that he did not expect to be putting out so many fires so early in his tenure. But in an interview with National Underwriter, Keating said, “Ignorance about the industry is high in Washington.”
In his first address to an ACLI annual meeting as the groups chief executive, Keating noted some of the battles in which the industry has been engaged during his time at the helm, including the favorable treatment given dividends but not annuities and the vote against corporate-owned life insurance in the Senate Finance Committee.
“There is no such thing as peace in public policy issues,” he reminded his audience. “The waters are always roiling.”
That being the case, Keating said it is essential that different elements within the industry continue to work together. “Who cares who gets the credit,” he said.
To this end, he has started to take some actions to trumpet “the new ACLI.” For one, the groups political contributions are being distributed more equally among the two political parties. Formerly, Republicans got 85% of ACLIs contributions and the Democrats 15%. That figure is now 60% Republican and 40% Democrat.
Working more closely with agent groups is another part of the new ACLI, Keating told NU. “Agents are the ground troops of the industry. They are deeply involved in their communities.” He pointed to how agents and the ACLI worked together to get the Senate Finance Committee to hold a hearing on COLI and possibly reconsider its vote.
Looking ahead, he told NU that the situation “will probably get more intense rather than less because with $450 billion deficits, some thoughtless policymakers may look to the industry to help make up the shortfall.”
That would be a grave mistake, said Keating. “The low savings rate is the biggest unfinished issue facing this country and the life insurance industry is the only long-term savings industry.”
Keating brings a lot of passion to the issue of helping Americans with retirement security. The U.S. government, he said, “needs to do more to encourage long-term savings. We dont need more encouragement to save for consumption with something like the Lifetime Savings Account proposal where you could save to buy a boat, for instance.”
He admitted that “it may be too late” for some older pre-retirees to save enough for a comfortable retirement but said that nonetheless “every dollar saved is a dollar more for enjoying life. Any saving is better than none.”
While some in the baby boomer generation still have hopes for Social Security, he said, the younger echo boom generation has started to save seriously at a much younger age than their parents.
Asked whether it would not be worthwhile under these circumstances for the industry to fight for the integrity of Social Security, Keating said, “We win when we fight for lifetime savings, when we can heighten the awareness of policymakers in this regard.”
Keating recalled during the interview how, when he was assistant secretary of the Treasury, he would often be in meetings with federal banking or securities regulators. Often, he said, the Comptroller of the Currency would function at these meetings not only as a regulator but as a defender of banks.
But because it is state-regulated, the life insurance industry is at a disadvantage in this respect, Keating said, “and doesnt have the same kind of voice at the table in Washington.” This is why he favors an optional federal charter for insurers.
“Its a more efficient, fairer structure,” he said, “and then you would have someone at the table” representing the industrys interests.
The Fed, the Comptroller and the SEC are “all federal entities that have a role in regulating some aspect of financial services,” Keating said. “These regulators say no, but they also say yes,” he added, envisioning the same kind of scenario if there was a federal insurance regulator.
Asked whether some of the problems the industry faces in Washington are due to being “too creative” in using the tax code with its products, Keating said “businesses today invest in response to tax laws.”
But he noted that “some abuses in the use of products bring adverse attention” to the industry. ACLIs response to legislators, he said, “is to tell them to address the abuse, not kill the product.”
One area where Keating parts company with many of his fellow Republicans is that he is not in favor of abolishing the estate tax. He is a “populist,” he said, and wants to keep the tax because “we dont have a class system in this country.”
Elements of tax policy “encourage responsible social behavior,” he said, pointing to the mortgage interest deduction that encourages home ownership and the charitable contribution deduction that encourages philanthropy.
“Keeping the estate tax also encourages” responsible social behavior, he said.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 17, 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.