In advance of the 2014 annual meeting of the Association for Advanced Life Underwriting, being held in Washington, D.C., May 4-6, NU Senior Editor Warren S. Hersch spoke with Marc Cadin, AALU’s senior vice president of government affairs (pictured below right). The interview covered legislative and regulatory developments that are top of mind for AALU’s leadership, as well as initiatives underway to help advance the association’s aims. The following are excerpts.
Hersch: What’s of most concern to AALU members at this year’s conference? Is there an overcharging theme?
Cadin: There is a juxtaposition between the client needs our members fulfill — needs centered on life insurance — and public policy, which oftentimes is going in the opposite direction.
According to LIMRA, there are about $15 trillion of unmet life insurance needs in this country. Yet, our members’ job gets harder and harder, whether because they have to defend again tax policy, regulatory policy or retirement security policy. This will be a general theme of the conference.
Hersch: What is the AALU’s position this year in respect to the tax-favored treatment of life insurance? Is the product’s tax tax treatment as much of an issue in 2014 as in prior years?
Cadin: We believe that life insurance is now taxed appropriately. We’ve done a lot of work around delivering this message. We also think that (a) continuing threats to the tax treatment is an underreported story; and that (b) many members of Congress still believe life insurance doesn’t merit a tax preference.
So we’re going to spend a lot of time on Capitol Hill communicating our position on taxation of the product, including this message: life insurance shouldn’t be considered a tax expenditure. Our industry does a lot of good for the the 75 million-plus Americans our members serve. And life insurance represents about 20 percent of long-term savings.
Hersch: In respect to federal tax policy, what is the immediate threat that AALU’s legislative team is focused on?
Cadin: Proposals in the Tax Reform Discussion Draft of House Ways and Means Committee Chairman Dave Camp would raise taxes on the industry by a total of about $60 billion. The discussion draft includes increased taxes on carrier reserves and increased taxes on the product, principally levies aimed at business uses of life insurance. The draft document would also eliminate the tax-favored treatment of life insurance in non-qualified deferred compensation plans.
The net result of all of these proposals would be reduced product sales — making our members’ jobs harder. So we don’t think the discussion draft represents good tax policy.
Hersch: Threats to the tax-favored treatment of life insurance, and the industry’s efforts to confront them, have been an ongoing topic of AALU meetings over the years. Why is the organization continually having to address this issue? Do industry stakeholders need to do a better job convincing legislators of the value of preserving the product’s tax-status?
Cadin: There is no question that we need to do a better job. Yes, our members are engaged throughout the year connecting with their members of Congress and Congressional staff. But we’re clearly not doing all that needs to be done to get Congress and state legislatures to propose policies that will make our members’ jobs easier, not harder.
Hersch: And why do you suppose the task is so difficult? Is the real issue that lawmakers, though well acquainted with the benefits of life insurance and the role that tax preferences play in product sales, view the need for new sources of revenue as the greater priority given strained federal and state budgets?
Cadin: That’s partially correct. But I don’t want to overstate the policies that were put forward in the tax reform discussion draft. The need for revenue, whether to offset spending or [interest] rate reductions, is driving a look at the product and the industry at a level that we have to match. And in connection with this proposal, we didn’t match it.
Hersch: So what’s the plan now? Will AALU be employing new strategies when interfacing with members of Congress and their staff when they go to Capitol Hill on Tuesday? How might this year’s advocacy efforts differ from those of prior years?
Cadin: Our members will ask their congressmen and senators to support policies that promote the life insurance industry and the people we serve — consumers.
Hersch: Would this be analogous to promises GOP lawmakers have made committing themselves to not backing proposals to raise taxes?
Cadin: No — those are typically campaign pledges. We’re not seeking a pledge, but rather a commitment to promote an industry that serves 75 million American families. We want lawmakers to not just say they will support the interests of the industry and the public, but also to actively engage in dialogue with their colleagues on behalf of the industry and the public.
Hersch: How many AALU members will be attending this year’s conference and going to Capitol Hill?
Cadin: There will be about 1,000 attendees, including 800 members, in attendance. Of the total, about 600 people will be heading up to the Hill on Tuesday. Most of the people are agents and brokers, but life insurance company executives focused on distribution will also be present.
Hersch: Apart from political advocacy, what initiatives will AALU be spearheading in the year ahead?
Cadin: Retirement security, tax and regulatory policies are all interconnected. They all impact how our members provide advice and the products that people need. We’re going to examine over the next year proactive policies we can promote that will better position our members to serve their clients and the public. We’ve never done this before.
Hersch: What state legislative and regulatory issues are top of mind for AALU at this time?
Cadin: There is bevy of activity in the states that we’re monitoring, both on the tax and regulatory sides. Some state legislatures have proposed taxing the inside build-up of life insurance on an annual basis to help fund priority projects. There are also state regulatory initiatives that we’re tracking. But because of the nature of our conference and our Capitol Hill business, we won’t be spending as much time digging into state issues at the meeting.
Hersch: To achieve its advocacy objectives, will AALU be looking to partner or better align its work on the Hill with sister associations —NAIFA, NAILBA, ACLI, among others — that also focus on regulatory and legislative issues?
Cadin: There’s no question that the work of these organizations will be crucial to achieving our common aims. We therefore have to ensure we’re working collaboratively with industry trade associations, whether they represent the carriers or other life insurance distribution groups.
Hersch: How confident are you that AALU will be able to advance the goals AALU has established for the 2014 annual meeting?
Cadin: We count among our members many of the industry’s top life insurance and financial service professionals. I’m highly confident that when they engage their senators and representatives on Capitol Hill on Tuesday, that we will move the needle forward.