The producers and others who went to Washington earlier this month to support a bill that would define fixed indexed annuities as insurance products may have lined up about 15 new cosponsors in the House.
Blair O’Connor, legislative affairs committee chair at the National Association for Fixed Annuities, Milwaukee, and chairman of the new Independent Fixed Annuities Agents Council, Sterling Heights, Mich., is basing that figure partly on visit reports from FIA fly-in participants.
The fly-in attracted a total of about 100 participants.
Earlier, O’Connor had estimated fly-in participants had visited about 150 congressional offices.
Organizers later went over reports and discovered that participants actually visited 55 Senate offices and 170 House offices, O’Connor said.
At least 9 House members have now formally agreed to cosponsor H.R. 2733, the FIA classification bill. Reps. Gregory Meeks, D-N.Y., has introduced the bill together with Thomas Price, R-Ga.
In the Senate, where Sen. Ben Nelson, D-Neb., is the primary sponsor of S. 1389, the H.R. 2733 companion bill, “I think we made a lot of good inroads,” O’Connor says.
FIA sellers and manufacturers have been lobbying for the bills in response to efforts by the U.S. Securities and Exchange Commission to implement Rule 151A, a rule that would classify the products as securities.
The SEC argues that it should regulate FIA products as securities because, from the perspective of consumers, they appear to be similar to securities.
Fly-in participants argue that the products clearly are insurance products, with principal and minimum returns backed by insurance company general accounts. They also argue that defining FIA products as securities would drive up compliance costs and make the products unaffordable.
S. 1389 backers are still hoping to get a version of the bill into the Restoring American Financial Stability Act of 2009 bill. That bill was approved by the Senate Banking, Housing and Urban Affairs Committee earlier this week, but Democrats are still working with Republicans to come up with a version that can attract the Republican votes needed to get the bill through the Senate.
“The more cosponsors we have, the better our chances,” O’Connor says.
O’Connor warns against expecting a sudden breakthrough.
“Politics is a slow business,” he says. “I look it as a series of incremental breakthroughs. Every time we go [to Washington], the people there know more about us.”
NAFA Executive Vice President Kim O’Brien says she was pleased with the fly-in turnout.
“We even had Idaho and Missouri,” O’Brien says.
Some key lawmakers come from those states, but finding agents from those states who can come to Washington is sometimes difficult, O’Brien says.
MEETING THE INSIDERS
Ben Nelson, the senator, spoke at a fly-in reception the evening before participants converged on Capitol Hill, and Meeks rallied participants at a fly-in breakfast meeting as the participants prepared to lobby.
Former Mississippi Insurance Commissioner George Dale, who is now a senior policy advisor in the Jackson, Miss., office of Baker, Donelson, Bearman, Caldwell & Berkowitz P.C., also spoke at the evening reception. He introduced Jane Cline of West Virginia, the current president of the National Association of Insurance Commissioners, Kansas City, Mo.; Kevin McCarty of Florida; and Ann Frohman of Nebraska.
O’Connor urged fly-in participants to have an “unbelievable day.”
“We’ve got to turn up the heat,” O’Connor said.
THE CITIZEN LOBBYISTS
Tom Hobbs, a Justin, Texas, a retail insurance agent, said at the fly-in reception that he participated in the fly-in because he believes in the product.
“If you put your money in there with me, you will not lose a dime,” Hobbs said.
If the SEC succeeds at making FIAs securities, the difficulty of complying with securities regulations would make selling the products unappealing, Hobbs said.
Patrick McCormick, who wholesales and retails at McCormick Financial Products L.L.C., Washington, N.J., attended the fly-in even though he’s licensed to sell securities.
“I’ve had senior citizens crying and thanking me” because they’ve earned a steady 5% to 7%, rather than losing heavily in the market meltdown, McCormick said.
The SEC wants to take a product that offers relatively generous guaranteed returns, along with the possibility of earning extra returns, and add unnecessary regulations that will force sellers to add sales loads equal to about 2.5% of assets, McCormick said.
McCormick noted that securities registration costs $3,000 for the securities side of his business, vs. $400 for the insurance side.
Errors & omissions insurance costs him about $1,700 per employee involved in securities, versus $500 per insurance employee.
Perhaps just as important, securities law tends to emphasize that financial services companies should “know their customers,” while insurance law emphasizes privacy, and that can lead to serious conflicts, McCormick said.
McCormick said support for Rule 151A outside the SEC seems to be moderate.
Some insurers have declined to take a firm stand, and that has led to confusion in the Senate, McCormick said.
Other fly-in participants included Wendy Waugaman, chief executive officer of American Equity Investment Life Holding Company, West Des Moines, Iowa (NYSE:AEL), and Mary Dinkel, a vice president at Industrial Alliance American Life Insurance Company, Scottsdale, Ariz.
“I really believe the product is the best thing for the consumer,” Dinkel said.
W. Andrew Unkefer, a Glendale, Ariz., said one advantage of having state regulators in charge of FIAs is that state regulators handle complaints themselves, rather than requiring consumers to go through arbitration.
“You have a state-paid advocate,” Unkefer said.
Later, on Capitol Hill, many fly-in participants said the event was awe-inspiring and fun as well as a way to make their voices heard on an issue that they care about.
Michael Passer, a Las Vegas FIA wholesaler, said while staring at Senate office buildings that he was amazed by the buildings themselves.
He said he was asking himself, “I get to go in this building?”
Diane Brewer, a Las Vegas financial services retailer, went with Passer to 5 meetings Wednesday, then went with another fly-in participant to a breakfast meeting with Senate Majority Leader Harry Reid, D-Nev. She did get time to make her case directly to Reid, but she spent an hour with an aide, and the aide made arrangements for an office staffer to take her on a tour of the Capitol.