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November 25, 2003 at 07:00 PM
Keeping Fingers Crossed On The COLI Agreement
The tentative Senate Finance Committee agreement on corporate-owned life insurance hopefully will put an end to an issue that probably should not have been raised in the first place.
The new language on COLI reinforces the marketing practices that emerged after legislation passed in 1996, such as notice to and consent of covered employees and no use of COLI for hourly rank-and-file employees.
Under the new language, proceeds from COLI policies will continue to be used primarily to protect business owners from the financial consequences of the death of a key employee and to provide valuable benefits to covered employees.
It is a major victory for the entire insurance industry–both agents and companies–which was faced with the difficult task of using cold, hard facts to counter a series of screaming newspaper headlines using emotion-laden terms like “janitors insurance.”
Even the most ardent critics of the life insurance industry and COLI now should be reassured that the types of policies at the heart of the newspaper headlines, which have not been written in 10 years, will not be written in the future.
Life insurance agents and companies should now be able to serve the COLI market without fear of Congress coming down hard on them again.
That, at least, is the hope. But it is always wise to remain wary and there is always the possibility that the COLI issue will rear its head again.
Indeed, while this is a major victory, assuming a majority of the Senate Finance Committee agrees to the compromise, it must be acknowledged that the life insurance industry did not escape from the debate totally unscathed.
