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NAILBA Speaker: Help Us Face Threats

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HOLLYWOOD, FLA.–The National Association of Independent Life Brokerage Agencies is working to address the many efforts to curtail insurance business protections, but it can’t do it alone, said a speaker here.

“We need your help,” said Leon Huffman, co-chair of NAILBA’s government affairs committee during the opening session of the association’s 28th annual meeting.

Some of legislative efforts now underway present “ominous threats to our livelihood,” said the president of Huffman & Associates, Orlando, Fla.

The economic problems have caused “a rise in skepticism unlike anything we have experienced” and a breach of trust between the people and the financial services industry, Huffman said.

People see the industry “portrayed as the epitome of everything that is wrong with corporate America,” he said.

“Add to that an administration and Congress that in the battle over health care reform has created a toxic legislative environment, and the opportunity for sweeping partisan policies to be enacted….While it’s hard to get things done, what does get done can be very, very bad, with little or no balance.”

Efforts are being made pass one-sided legislation created under the guise of consumer protection, he said.

There is an “overarching and aggressive move to regulate our business, our fiduciary role, our suitability role, and even our supervisory responsibility over our own agencies.”

The battle is on a number of fronts, Huffman said.

For instance, the effort to create harmonized fiduciary standards would subject broker-dealers to the same rules as apply to fee-based registered investment advisors. “That’s like forcing a square peg into a circle,” he said.

The bill seems to have a bias against commission-based compensation, he added.

Huffman also raised questions about proposals to create a National Office of Insurance Information.

Turning to indexed annuities, he asked, “What is an insurance and investment product?” The Securities and Exchange Commission’s proposed rule 151A, which seeks to treat indexed annuities as securities, shows “twisted logic” on this issue, he argued.

Huffman expressed hope that proposed federal legislation, HB 2733 and S 1389, will pass and end concern over the indexed annuity. But if the legislation does not pass and the rule is adopted, the outcome has “the potential to lead to a reorganization of independent distribution that would shake NAILBA to its core,” he contended.

Another battle he sees is the possibility that Congress will try to find revenue to fund various initiatives by curtailing the tax protections that are built into the industry’s products. He pointed to protections in Internal Revenue Code Sections 7702 and 101, governing the inside buildup in life insurance and the receipt of life insurance death benefits on a tax-free basis. “These core benefits are under intense scrutiny,” he warned.

The threats to the industry have never been so grave, Huffman concluded.

“Silence is not an option,” he said. “The more vocal we are, the more they will listen.”


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