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Industry Battling Legislation That Bans Travel Risk Underwriting

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The life insurance industry is fighting a behind-the-scenes battle to keep the House Financial Services Committee from adding an amendment to legislation extending the Terrorism Risk Insurance Act that would limit its authority to price or not issue life insurance on the basis of a customer’s foreign travel plans.

Action on TRIA extension in any form is not expected until the week of Nov. 14, at the earliest, and life insurance industry lobbyists are taking advantage of that window to argue strongly against the legislation, known as the Wasserman Schultz bill.

The legislation, H.R. 3639, has 45 co-sponsors, strong support from Democrats and, according to several industry and congressional sources, growing support from Republicans on the committee. But it has little support in the Senate, and while the House panel may debate the matter, enactment of legislation dealing with the issue this year is unlikely.

There is also action on this issue at the state level. Earlier this month, California Gov. Schwarzenegger signed legislation prohibiting a life and disability insurer from denying a policy or charging more for coverage unless the risk of exposure has been substantiated.

Other states are considering the issue, and the National Association of Insurance Commissioners has delegated its Life Insurance and Annuities Task Force to look into the issue.

The NAIC has proposed a draft resolution outlining what issues state policymakers should use in drafting a position on the issue, but the Center for Economic Justice argues that approach is inadequate.

It suggests that the state commissioners should instead disclose what they know about the practice in question. “Regulators should be publishing information about how many insurers utilize this underwriting guideline, how many consumers are affected and what sort of actuarial support regulators have found for this underwriting guideline in their–the regulators’–efforts to ensure that the practice is based on sound actuarial principles,” the CEJ says in a comment letter to the Task Force in September.

Regarding the proposed federal legislation, Kimberly Olson Dorgan, senior vice president, federal relations, at the American Council of Life Insurers, said the industry does have objections to the Wasserman Schultz bill. “One concern is the enforcement provisions in the bill,” she said, noting that the enforcement process included in the bill is “difficult to follow and administer.”

Moreover, Dorgan said, “Our companies would not want to be forced to take on a certain risk. Life insurance is available and there are companies that would be willing to take on certain risks that others may not. Each company has their own criteria for assessing risk.

“Our concern is that this would impose a broad-based requirement that could affect a company’s ability to underwrite properly,” she said. “Basically the bill would deny our ability to turn down a customer if that customer is going to a dangerous place.”

“Basically the bill would deny our ability to turn down a customer if that customer is going to a dangerous place,” says ACLI’s Kimberly Olson Dorgan.


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