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NAIFA says prepare for legislative battles ahead

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Legislative and regulatory threats to the industry, and actions that are needed to counter them, were the focus of Sunday’s opening general session of the National Association of Insurance and Financial Advisors’ annual meeting and career conference, held in San Antonio. NAIFA’s leadership team, from the CEO on down, used the occasion to call on members to remain vigilant against moves by the federal and state governments, including efforts to tax the inside build-up or cash value of permanent life insurance policies.

Robert Smith

“The tax-favored treatment of our products remain at risk,” said outgoing NAIFA President Robert Smith. “To move forward, we need to have more feet on the ground.” Translation: More life insurance and financial service professionals whom NAIFA can call on to help advance key components of the association’s mission–political advocacy to protect the industry and its products; and the professional development of its members.

To that end, NAIFA is establishing alliances with life insurers through its corporate partnership program. The association’s relationship with the carriers, said Smith, is symbiotic: The association needs the companies to recruit and train new agents; they, conversely, depend on NAIFA to protect the industry’s core products and help advisors succeed in their practices.

See also: Why we need smart regulation

To further its advocacy, membership and professional development goals, said Smith, NAIFA also is deepening alliances with sister organizations. They include the American Council of Life Insurers (ACLI), the Association for Advanced Life Underwriting (AALU), GAMA International, Women in Insurance and Financial Services (WIFS), the Million Dollar Round Table (MDRT) and The National Association of Independent Life Brokerage Agencies (NAILBA).

The alliance-building extends to NAIFA’s state associations. Just in the past year, said Smith, nearly 20 states representing 45 percent of the organization’s membership, are participating in national-state partnerships, including co-promotion of state association conferences and symposia.

One result of all the partnering activity: Sixteen states have boosted their membership ranks, up from just two last year. In the corporate arena, Smith noted, Thrivent Financial has added 800 of its field agents to the association’s ranks.

New and recent recruits were among the 1,000-strong agents who participated last April in NAIFA’s inaugural Congressional Conference, a highlight of which was a “Day on the Hill:” the lobbying of legislators by NAIFA members to preserve the existing tax regime governing life insurance products in the coming debate over tax reform.

That regime is under increasing threat, said Smith, because of the growing pressure on Congress to find new sources of revenue to close the budget deficit and burgeoning national debt.

“The inclination in both houses of Congress is to start with a clean slate, which means eliminating all tax deductions and exemptions,” said Smith. “We’ll have to fight to get our tax provisions back in.

“The federal deficit is now $17 trillion,” he added. “Until the deficit is under control–and this could be a long-term problem–we believe that our industry and NAIFA will be at risk.”

NAIFA is counting in part on the skills of Susan Waters, now three years into her tenure as CEO, to navigate the association through its coming battles. The recipient last July of the American Society of Association Executives’ prestigious 2013 Key Award, Waters touched on a range of issues that will demand NAIFA’s attention in the year ahead.

Among them: Contingent support for federal agent licensing reform legislation known as NARAB II. NAIFA has met with officials at the new Federal Insurance Office and submitted formal comments to inform a Dodd-Frank requirement that the FIO study ways to modernize and improve the regulation of insurance.

NAIFA additionally is pursuing modifications to the Affordable Care Act to improve affordability and sustainability of private insurance choices. A chief aim of the lobbying effort is to ensure consumers have access to professional services provided by fairly compensated, licensed and regulated insurance agents and advisors.

Together with other industry associations, NAIFA is also backing legislation to protect seniors, most notably state bills to prevent the spread of stranger-owned life insurance or STOLI. To date, 30 states have enacted anti-STOLI legislation.

Following meetings with the New York Insurance Department, NAIFA has also fine-tuned its position concerning compensation disclosure. If the customer requests information on compensation (which typically occurs in less than 1 percent of client engagements), NAIFA will support “the reasonable disclosure of this information by the producer.”

NAIFA, which established in 2010 The State Tax Challenges Coalition with the ACLI, also remains on guard against potential moves by the states to tax the inside build-up of life insurance. This is a growing concern because the states, battered by the 2008 recession and its aftermath, are keen to replenish their coffers.

“We must remain vigilant and constantly active on these issues,” said Waters. “Our collective voice is making the difference. At every opportunity, we are making it clear to elected officials that taxing life insurance will harm American families and businesses.”

Whether NAIFA can maintain its political advocacy and professionals development initiatives over the long haul remains an open question. Near-term, the association’s financial position is “stable,” according NAIFA Treasurer Matthew Tassey. Thanks to the implementation of several cost-control measures, including the elimination of the mortgage on its building, NAIFA has achieved operating surpluses in three consecutive years and now has $3 million in reserves.

Tassey cautioned, however, that NAIFA’s reserves amount to less than five months of operating expenses — and could be quickly whittled away by future expenses. A big one coming the down pike is the 2014 Congressional Conference, an event that NAIFA intends to host annually. The price tag for the gathering next year: $500,000.

And while NAIFA’s expenses are rising, its revenue base – annual dues – is falling because of declining membership, which currently stands at between 43,000 and 44,000. To keep revenues from contracting further, said Tassey, a proposed dues increase of $25 per member is “absolutely essential.”

“Squeezed between rising costs and declining membership, the national budget cannot be left in a deficit position,” said Tassey. “The continuation of many vital services provided by NAIFA — needed to keep you in business, and help you grow your business — cannot be assured unless the due structure is amended to ensure adequate revenue to carry out our mission — and your mission.”