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Place Blame Where Its Due

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Scapegoating seems to be turning into a national pastime, and perhaps no institution in government is more adept at it than the Congress of the United States.

A wonderful example of this is the debate over whether group life insurance should be covered by the Terrorism Risk Insurance Act. Under TRIA, it is up to Treasury to determine, based on specified criteria in the statute, whether group life should qualify for the federal safety net.

Some months ago, the Treasury Department made its determination that under the statutory guidelines, group life should not be covered.

At a recent hearing on TRIA, Treasury representatives were blasted by some members of Congress who accused the department of placing buildings ahead of people” and other nasty things.

Left unexplained was why Congress is not guilty of the same offenses.

It is Congress that writes the laws of the land. It is Congress that decided not to affirmatively put group life in TRIA. It is Congress that approved the criteria used by Treasury to make its group life determination.

This is not to question whether group life should be covered by TRIA. In fact, I think it should be covered because it has the same characteristics as workers’ compensation.

My point is that Congress could have done so but chose not to. And rather than own up to their own decision, some members choose to pin the blame on Treasury.

This scapegoating, of course, is nothing new to the life insurance industry. The industry itself has been the target of it many times, most notably in the tax arena.

Usually, the scenario goes something like this:

Congress will approve an omnibus tax bill that is slapdashed together in the middle of the night in the rush toward adjournment. It will be a monstrously complicated document more than 1,000 pages long and riddled with loopholes and special interest exemptions.

If I told you that even 10% of the members had anything more than the vaguest idea of what they were putting into law, I’d be too charitable.

A talented life insurance practitioner will scour the bill and find a way to develop a creative new product that saves tax dollars for his or her clients.

Eventually, this practice will attract negative publicity and some members will react with feigned outrage over this “abuse.” They will call it an “abuse” because they dont want to call it what it is: perfectly legal.

Congress will, in effect, blame the life insurance industry for this situation and then try to pass legislation that is punitive rather than remedial.

The industry will then have to embark on a massive and expensive lobbying campaign aimed at eliminating the “abuse” but protecting “legitimate” uses of life insurance.

Let me say as an aside that I put the word “legitimate” in quotes not to be sarcastic but because I personally believe that any legal use of life insurance is a legitimate use.

It is not the responsibility of life insurance practitioners to place themselves in the collective head of their elected representatives and try to reach some consensus on Congressional intent regarding a nuance in the tax code. It is the responsibility of Congress to enact clear legislation.

But as a practical political matter, the industry has to go along with this game of distinguishing “abuses” from “legitimate” uses of life insurance to assuage Congressional ego. It is a game of “let’s pretend” that responsibility for the so-called “abuse” lies somewhere other than Capitol Hill.

The entire nation, not just the life insurance industry, would be much better served if Congress as an institution did what it demands of others; that is, accept full responsibility for its own actions.

It is high time Congress stopped making scapegoats out of those who do nothing more than follow the letter of the law.

Steven Brostoff

Washington Editor

Reproduced from National Underwriter Edition, May 28, 2004. Copyright 2004 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.


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