Even if the federal government keeps its hands off insurance, regulatory changes may lead to higher distribution costs and lower profits.[@@]

Life insurance company chief financial officers have made those predictions in an informal CFO survey sponsored by Tillinghast, an arm of Towers Perrin Inc.

Only 32% of the participating CFOs said they expect to see a “significant move toward national regulation of insurance, but 79% said they expect to see “many large states adopt comprehensive requirements for disclosing producer compensation arrangements with the insurance carriers to the consumer at the point of sale.”

Only 39% of the CFOs said states will apply producer compensation disclosure rules solely to brokers.

Although 71% of the CFOs believe the level of sales will remain the same even after new producer compensation rules take effect, 83% believe distribution costs will go up moderately or significantly, and 58% believe product profitability will decrease moderately or significantly, according to Tillinghast.

“Clearly, profit margin pressures will continue to increase,” Tillinghast researchers write in a review of the survey results.