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Limited Term License Proposal Gets A Lease On Life

Salt Lake City

A unanimous decision by regulators to adopt a resolution opposing limited term licenses was short-circuited by a call from different quarters for more discussion on the issue.

Bills that would allow the creation of limited licenses to sell term insurance have appeared in several state houses including Alabama, Louisiana, Mississippi and Illinois.

Primerica Financial Services, Duluth, Ga., has been advocating the creation of these licenses as a way to make insurance available to the underserved lower and lower middle class markets. Opponents, which include the National Association of Insurance and Financial Advisors, Falls Church, Va., maintain that the limited licenses will allow agents to circumvent needed educational requirements.

During the spring meeting of the National Association of Insurance Commissioners here, the Producer Licensing working group unanimously adopted a resolution opposing these licenses.

The resolution also rejected requests to establish any other additional limited lines that may be proposed “because the implementation of any new limited line license would not preserve the necessary consumer protections and would not be consistent with the adopted uniform licensing standards of the NAIC.”

But the working groups parent committee, the Market Regulation and Consumer Affairs (D) committee, postponed the resolutions advancement until further discussion takes place.

Arguments for forestalling the resolution included a legislators concern that there would be an encroachment on legislative authority to introduce bills legislators felt were appropriate for their state. Rep. Shirley Bowler, R-Harahan, La., offered a counter resolution, which she was told to submit in writing.

In an interview with National Underwriter, Bowler detailed her concerns. She questioned the unwillingness to be open to new ideas that could potentially improve the insurance market, likening it to “a librarian who doesnt want books disturbed.” The value of state authority is that it can offer an incubator for new ideas, Bowler explained. Uniformity should not be the total goal of regulation, she said.

“Term life can be a good buy, a smart buy and if we can find a way to offer it to consumers, we really should do it,” Bowler added.

Regulators approve the policies that agents bring to consumers, so there is regulatory oversight of what is being sold, she continued. Bowler, who said she favors free market principles, maintains that the issue deserves more discussion.

The National Conference of Insurance Legislators, Troy, N.Y., is gathering information on the issue and its impact on the legislative process, said Susan Nolan, executive director.

Birny Birnbaum, an NAIC-funded consumer and executive director of the Center for Economic Justice, Austin, Texas, told the “D” committee he would like to hear more discussion of the issue since term insurance seemed like “a plain vanilla” product to sell. If a limited license is available for credit insurance, he asked, what argument could be offered against a limited term license?

At the Producer Licensing group, arguments both for and against a limited term license were offered before the group passed the resolution.

A limited term license will bring more agents into the business who will work in underserved markets, argued Peter Schneider, Primerica executive vice president and general counsel. For instance, he said the Hispanic marketplace is the most underrepresented with 70% of Hispanics having no life insurance.

And, the agent population is shrinking, he said, citing LIMRA statistics which suggest the number of full-time agents dropped 21% from 1989 to 1998. The average age of an agent is 55, he continued. “It is a dying breed.”

Additionally, the cost to license someone is between $140,000-$225,000, he said.

Those who are agents today are focused on selling high face amount products to affluent people, Schneider said.

But members of the working group grilled Schneider when he brought his case before them. The limited license proposal currently wending its way through the Alabama legislature was called a “subterfuge” to circumvent educational requirements for producers. The proposal, regulators argued, said those with limited licenses would not replace a term policy with another term policy but did not say a limited term agent would not replace a universal life or a whole life contract.

Schneider also was told that regulators would be contributing to a potential problem of products that are not properly sold in the market if they approved producers who were not certified with a state license.

But he countered that Primerica was not focused on replacements but on new sales to an underserved populace.

Maureen Adolph, a representative for Prudential Financial, Newark, N.J., said Prudential met with Primerica through the ACLI but that the issue came up very belatedly after bills had been introduced in Mississippi and Alabama. The bill in Alabama is “moving as we speak,” she continued. The effort to obtain a limited term license “has a lot to do with economics, but it is the economics of Primericas business.”

Jim Poolman, North Dakota insurance commissioner, said it is important that the nations regulators go on record to reinforce the need for uniformity including uniformity in producer licensing. It is important that the resolution go before the executive committee and plenary by June, he said.

Reproduced from National Underwriter Edition, March 17, 2005. Copyright 2005 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.