Re: “New COLI Rules: Good Intentions, ‘Disastrous’ Reporting Requirements,” (National Underwriter, Aug. 21, 2006.)
The new reporting requirements for corporate-owned life insurance should come as no surprise to anyone connected to this important product. This issue has been widely examined and discussed–and well reported by National Underwriter, among other publications–since early 2004.
Keep in mind that the market was effectively shut down three years ago after misleading Wall Street Journal articles about COLI prompted a Senate Finance Committee rush to judgment to effectively shut down use of the product. As a result, agents, companies and trade associations embarked on the extremely difficult task of convincing committee members to step back from their initial action in favor of responsible reform. This entailed months of meeting with Finance Committee members, providing accurate information about COLI and the tremendous benefits it provides, and working with legislators on reforms that codify best practices to assure that COLI is used responsibly for the benefit of businesses, employees, and their families.
It took hard, dedicated work by the industry and, most of all, the actions of key legislators–including Senators Kent Conrad, Charles Grassley, Gordon Smith, Rick Santorum, Jim Bunning, Trent Lott, and on the House side, Representatives Tom Reynolds and Earl Pomeroy–to put aside a proposal that would have gutted the product and to replace it with one that ensures this vital, long-term planning product will remain available to U.S. businesses.
In general, consent requirements are nothing new because they have been required in various states for many years. To be sure, additional reporting and compliance requirements may be cumbersome. But these hoops that must be jumped through are a fair price to be paid for keeping this valuable business-planning product available. That was the choice and we commend Congress for choosing wisely.
President & CEO
American Council of Life Insurers
Association for Advanced Life Underwriting
National Association of Insurance and Financial Advisors