Life insurance agent trade groups are asking members of the Senate Banking Committee to reconsider a bill that would impose a fiduciary standard on sale of investment products by agents.
The proposed legislation would have an “enormously costly and counterproductive impact” and would be “a radical departure from current law,” according to a letter to committee members by officials of the Association for Advanced Life Underwriting, the National Association of Insurance and Financial Advisors and the National Association of Independent Life Brokerage Agencies.
The potential consequences of enacting the Investor Protection Act as it currently stands would be to reduce consumer access to insurance and investment products and to downgrade advisors’ services to consumers, the groups charged.
The bill would lead to less “financial protection of Americans and loss of capital formation and jobs,” argues the letter, which was sent Friday.
The letter suggests that the committee undertake a study “of the appropriate regulation of brokers, dealers, and investment advisers.”
It also argues that similar provisions imposed on agents in the United Kingdom “have contributed to a decline in the agent population from 180,000 to 5,000 over the last two decades, decreasing access to critical financial products and services for middle-market consumers.”
The provisions are part of comprehensive legislation introduced earlier this month by Sen. Chris Dodd, D-Conn., designed to tighten regulation of the financial services regulatory system.
The bill would create an Office of National Insurance, enact the Nonadmitted and Reinsurance Reform Act of 2009 and require a study on ways to modernize insurance regulation and provide Congress with recommendations, among other provisions.
The bill is titled, Restoring American Financial Stability.
The committee began marking up the bill last Thursday, but, as the result of scathing criticism by Sen. Richard Shelby, R-Ala., ranking minority member of the committee, Dodd suspended work on the bill and reopened talks for a bipartisan bill.