GRAPEVINE, TEXAS — What if Democrats and Republicans in Congress show they can work together by uniting to tax life insurance policy inside buildup?

That question haunts people like Leon Huffman, an Orlando, Fla., life and annuity distributor and government affairs committee co-chair at the National Association of Independent Life Brokerage Agencies (NAILBA), Fairfax, Va., and Alex DelPizzo, an insurance lobbyist at Winning Strategies L.L.C., Washington.

The possible new threats to tax-free buildup of cash value inside life insurance policies came up today during a government affairs panel discussion at NAILBA’s annual meeting. Huffman and Del Pizzo appeared with a third government affairs expert, Chris Greis, a life wholesaler at Leaders Partners Inc., Barrington, Ill.

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We’re “live tweeting” NAILBA 29 here, under the Twitter name NatUndLife.

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Now that the Republicans have made massive gains in Congress in the recent elections, “you have a bunch of people there who have no idea what you do,” DelPizzo said.

Huffman noted that some key leadership posts are still in contention. Rep. Spencer Bachus, R-Ala., for example, has been the highest-ranking Republican on the House Financial Services Committee, but he received large contributions from federal mortgage guarantee agencies, and many Tea Party members would prefer to see the committee chairman be Rep. Ed Royce, R-Calif.,Huffman said.

Royce is a long-time friend of the insurance industry.

Once the Republicans settle in, they could help control how the Obama administration applies the provisions in the new Dodd-Frank Wall Street Reform and Consumer Protection Act, but Republicans and Democrats seem unlikely to work well enough together to get much passed, the panelists agreed.

Despite the deep divisions between the parties, Democratic senators from conservative states and Republican senators worried about challenges from Tea Party members could find ways to cooperate on efforts to raise federal revenue and cut the deficit, DelPizzo said.

Huffman said he believes the real message of the fall elections was fiscal. “The country is scared, truly frightened, by the mounting debt,” he said.

Past efforts to tax inside buildup have failed, but “the threat “could be real this time,” Huffman said.

For now, Democrats and Republicans in Congress are showing little capacity to team up to pass controversial tax bills. They are doing little about the estate tax and almost nothing to come up with a permanent estate tax solution, DelPizzo said.

In 2011, if Congress does nothing, the estate tax will revert to the high levels in effect back in 2001.

DelPizzo said he expects to see Congress to do nothing and 2001 estate tax rules to come back.

“I would hope cooler heads prevail, but it hasn’t happened yet,” DelPizzo said. “I wouldn’t count on it.”

Although gridlock now prevails in the Capitol, insurance lobbyists are worried because the National Commission on Fiscal Responsibility and Reform, a bipartisan group created by President Obama to recommend ideas for cutting the deficit, is considering a list of proposals that calls for eliminating all “tax expenditures,” including the home mortgage interest deduction and special consideration for retirement accounts and insurance products.

If defenders of the home mortgage interest deduction go head to head with defenders of protecting inside value buildup, “who’s going to win that battle?” Huffman asked.

Distributor and producer groups may not get full support on the issue from carriers, because the carriers will be worrying about their own tax issues, Del Pizzo said.

Also at the NAILBA annual meeting:

– Chris Greis warned against assuming that the SEC efforts to apply the same fiduciary standard to broker-dealers and investment advisors would affect only sellers of variable life and annuity products that are classified as securities. “You could easily see this creep over to our side of the business,” Greis said.

– Jim Glickman of LifeCare Assurance Company, Woodland Hills, Calif., said he believes most of the recent price increases and market withdrawals in the long term care insurance market have to do with business priced years ago, when, partly due to regulatory pressure,

carriers used what proved to be unrealistically high lapse rate assumptions.

The LTC market looks bright for carriers with properly priced products that can benefit from marketing for the government’s poorly designed new worksite LTC program, Glickman said.

“I still think there are some companies that are going to figure it out while the figuring is good,” Glickman said.

– Ramiro Rencurrell, president of Magna Life Settlements Inc., Miami, and a board member of the Life Insurance Settlement Association, Orlando, Fla., said he is at the NAILBA meeting to reach retail producers by talking to their brokerage general agencies.

The life settlement market itself is healthier than it was a year or two ago, Rencurrell said.

“We see capital coming back in — private equity capital, pension fund money,” Rencurrell said. “It’s definitely looking positive.”

– Mark Storms was at the meeting for First Insurance Funding Corp., Jersey City, N.J., to let wholesalers know that traditional life premium financing that has nothing to do with stranger-originated life insurance still exists. Business owners may use finance to avoid having to take cash out of their companies to pay premiums, and investors may use financing to avoid having to take cash from investment arrangements.

“We try to spread awareness,” Storms said. “A lot of people think premium financing is dead.”

– Chip Milner, a Lawrenceville, Ga., wholesaler, said business was great last year for an agency like his, which focuses on fixed and indexed products, and even better this year.

“When the economy’s poor, consumers prioritize,” Milner said. “Our products are serious products for serious needs.”

– Booth goodies: Royal Neighbors of America, Rock Island, Ill., a fraternal society, tempted attendees with potentially lifesaving swag: Pedometers and sliderule-style guides to walking.

Other booth goodies included giant lollipops (Lincoln National Corp., Radnor, Pa. (NYSE:LNC)); Snoopy cookies (MetLife Inc., New York (NYSE:MET)); and wooden block puzzles (AXA Equitable, New York).

Allianz Life Insurance Company of North America, Golden Valley, Minn., brought an electronic golf driving range.