Carolyn Coda at the 2018 LIMRA annual conference, in New York. (Photo: Allison Bell/TA) Carolyn Coda (Photo: Allison Bell/TA)

A year ago, life insurers were saying little about the tax bill debate in Washington, even though the tax bill drafts were all full of life insurance provisions.

Carolyn Coda — the deputy head of Americas regulatory affairs at Swiss Re  — explained Monday why life insurers were so quiet: The original version of the Tax Cuts and Jobs Act (TCJA) bill would have been terrible for life insurers.

“It was quite close to being catastrophic for the insurance industry,” Coda said.

(Related: Senate Passes Tax Bill That Includes Scott Life Amendments)

Coda told the TCJA story in New York, during a legislative and regulatory affairs session at LIMRA’s annual conference.

What went wrong?

The TCJA bill drafters wanted to cut the overall corporate tax rate to 21%, from 35%. They needed to find “pay fors” to pay for the tax cut.

The drafters thought one life insurance reserve proposal would cost life insurers about $25 billion over 10 years.

Life insurers estimated the actual 10-year cost would be closer to $300 billion.

Life insurers had to have their actuaries explain the problem to congressional aides who, in many cases, had little knowledge of insurance, Coda said.

Eventually, Coda said, Congress changed the provision.

But “life insurers did pay for a disproportionate amount of that rate reduction,” Coda said.

The TCJA story showed that life insurers need to do a better job of communicating with Congress, Coda said.

What else did panelists at the session say?

Here are seven other things Coda and the other participants talked about:

1. The Federal Elections

Randy Hardock, a partner at Davis & Harman LLP in Washington, said he thinks that one possible election outcome is that the Republicans will keep a narrow lead in the Senate, and that the Democrats will end up with a narrow majority in the House.

If Democrats take control of the House, Rep. Maxine Waters, D-Calif., would probably take over from Rep. Jeb Hensarling, R-Texas, as chairman of the House Financial Services Committee.

In that scenario, Hardock said:

  • The House Democratic leaders would organize many hearings.
  • Democrats in both the House and the Senate would likely do what they could to slow and avoid votes on Republican initiatives and nominees.
  • Democrats would have too narrow of a majority in the House to pass much legislation in the House, let alone pass legislation that could get through a Republican-controlled Senate.

Bridget Hagan, a partner at The Cypress Group, a government relations firm, said she believes Waters has a strong interest in keeping artificial intelligence algorithms from having a disparate impact on different groups of people.

If Waters runs the House Financial Services Committee, there will almost certainly be House hearings in 2019 on use of artificial intelligence algorithms in the financial services sector, Hardock said.

2. California

Dave Jones has been California’s insurance commissioner, and one of the most visible players in insurance regulation in the United States, since 2011.

Now he will be leaving the commissioner’s office, because of state term limits.

3. D.C. Dysfunction

Because Congress has so much trouble getting anything one, states are taking charge of dealing with many financial services issues, such as privacy and sales standards, Coda said.

“If you push on D.C., it pops in the states,” Coda said.

4. Extra D.C. Dysfunction

After the Nov. 6 elections, the current schedule calls for the House to be in session for 16 days, and the Senate to be in session for 20 days.

During that kind of lame duck session, many lawmakers will know they are about to lose their jobs, and all of those lawmakers’ staffers will know that they are about to lose their jobs, Hardock said.

“The truth is, they’re not very happy,” Hardock said.

That unhappiness could keep Congress dysfunctional and, possibly, make the dysfunction worse, Hardock said.

5. Government Shutdown

Congress has already passed the legislation needed to keep about 75% of the government running but still needs to pass more legislation to avoid a partial government shutdown in December.

The panelists said the battle between congressional Democrats and President Donald Trump over funding for a wall between the United States and Mexico could lead to a partial government shutdown for a “considerable length of time.”

6. Sales Standards

The U.S. Securities and Exchange Commission is working on its proposal, and the U.S. Department of Labor is revisiting its own fiduciary standard.

States are developing their own standards.

Andrew Bowden, general counsel at Jackson National, said he thinks new standards are definitely coming.

“To me, the only question is whether these are going to be done uniformly,” Bowden said.

If the SEC is slow, or if the SEC comes out with a standard that’s weak, that could prompt states to develop a patchwork quilt of state standards, Bowden said.

Another concern, Bowden said, is that standards writers could shut out insurance-based products, by creating standards that are tougher on insurance than on other financial services products.

7. Privacy

Coda said privacy policy efforts give her heartburn.

“We’re a data-driven industry,” Coda said.

Often, Coda said policymakers come up with privacy policy efforts that would have unintended effects on insurers. Again and again, Coda said, insurance industry representatives have to explain what insurers need to the policymakers.

— Read How Do You Measure the Effects of Owning an Annuity?on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on LinkedIn and Twitter.