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September 16, 2004 at 08:00 PM
Anchorage, Alaska
Insurers say that they have tax policy concerns about new life insurance products and are asking regulators to step in and help them remedy perceived problems.[@@]
Representatives of the life, health and property-casualty insurance industry spoke during a newly created tax policy working group that met during the fall meeting of the National Association of Insurance Commissioners here.
In response to concerns expressed, John Oxendine, Georgia insurance commissioner, said that regulators would try to meet with representatives at the Internal Revenue Service prior to the NAIC winter meeting in December.
For life insurers, the issue of insurable interest and its potential impact on future tax policy is of paramount concern, says Bill Anderson, a representative with the National Association of Insurance and Financial Advisors, Falls Church, Va.
Traditionally, life insurance has been sold based on insurable interest, a connection between the life being insured and the beneficiary. But in states like Texas and Alabama, that traditional concept is being revisited. In Texas, third parties with no insurable interest already can take out life insurance on individuals, according to Jose Montemayor, Texas insurance commissioner. And in Alabama, a bill that would have allowed this practice in the “growing area of megabuck life insurance” was defeated in the state House of Representatives, says Walter Bell, Alabama insurance commissioner.
Anderson says that the issue is likely to start showing up in more states, prompting NAIFA, the American Council of Life Insurers, Washington; and, the Association for Advanced Life Underwriting, Falls Church, Va., to begin an effort to alert state legislators. And Frank Keating, ACLI president, raised the issue with U.S. Senators Kent Conrad and Gordon Smith.
Investor owned life insurance includes a new type of offering called life insurance life annuity combinations (LILACs), in which a life insurance contract is purchased along with an immediate annuity, both on the life of a donor. The annuity income pays for the insurance policy premium.
North Dakota Insurance Commissioner Jim Poolman asked Anderson to differentiate between these new investor owned life insurance contracts and corporate-owned and bank-owned life insurance (COLI/BOLI.)
