BIG “I” UNVEILS 2006 LEGISLATIVE PACKAGE
Regulatory, tax and legal reforms, producer licensing, disaster legislation lead agenda
WASHINGTON, D.C., Jan. 5, 2006—The Independent Insurance Agents and Brokers of America (the Big “I”) hopes to follow up on a very successful 2005 by advocating aggressively for a number of legislative reforms, at both the federal and state levels, in 2006.
“We had a great 2005,” says Big “I” CEO Robert A. Rusbuldt. “Starting with the passage of class-action reform, ending with the extension of a modified federal backstop for terrorism risks, and including major flood-insurance and crop-insurance reforms, among other important issues, we moved our agenda ahead significantly last year. This year, we hope and expect to build on that momentum and achieve a number of new milestones in Congress and in the state legislatures across America.”
The legislative agenda for the nation’s largest insurance association this year includes the following items:
- Insurance Regulatory Reform—The Big “I” will continue to strongly support the State Modernization and Regulatory Transparency (SMART) Act discussion draft, the result of the joint efforts of House Financial Services Committee Chairman Mike Oxley (R-Ohio) and Subcommittee Chairman Richard Baker (R-La.). Independent agents and brokers hope to see the discussion draft, which would reform the current state-based regulatory system without creating a federal regulator or “optional” federal charter, introduced and moved through the House Financial Services Committee this year.
“The Big ‘I’ and its 300,000 agents, brokers and employees across America strongly support the SMART Act,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations. “Its approach of targeted, common-sense reform preserves the strengths of the existing system while improving it in the areas where it is needed. We look forward to working with Chairmen Oxley and Baker as they refocus on this very important legislation after they successfully ushered through Congress a TRIA extension at the end of last year. We will also work closely with Chairman Richard Shelby (R-Ala.), Senator Chris Dodd (D-Ct.) and others as the Senate Banking Committee continues its review of insurance regulation.”
- Producer Licensing—The Big “I” wants all jurisdictions to issue and renew producer licenses on a reciprocal basis and to bring about increased uniformity in key areas. Many states enacted reciprocity and other reforms in the early part of the decade, but the reform effort has waned, and little additional progress has been made since then.
One of the association’s key objectives is to address the requirements in many states that force an insurance agent to obtain three licenses (an individual license, an entity license, and a corporate registration) before placing business in a particular jurisdiction. These duplicative requirements impose significant and unjustified costs on the industry and hinder an agent’s ability to serve customers in a timely and responsive manner. The Big “I” is also developing a targeted list of reforms that will make the licensing process simpler for multi-state producers. For example, it is working to eliminate the requirement that nonresident applicants must provide a letter of certification from their home state regulators.
“Agents and brokers in today’s regulatory environment face imposing licensing burdens, and our members struggle to stay on top of the required paperwork and clear the logistical and bureaucratic hurdles that are in place,” says Wesley Bissett, Big “I” senior vice president for government affairs and state relations. “Staying in compliance with the distinct and often idiosyncratic licensing laws of every state is an expensive, time-consuming, and maddening effort for many agencies, and a dedicated staff person or costly outside firm is often required to manage an agency’s compliance efforts. Insurance producers across the United States are frustrated by the current system, and they understandably want ease, efficiency, and speed in the licensing and renewal process.”
- Tax Reform—The Big “I” continues to support changes in the tax code to allow a quicker depreciation schedule for intangible assets, such as customer lists, when they are acquired in the purchase of small businesses; and supports legislation to allow purchasers of eligible small businesses to write-off as much as $5 million of purchased intangibles over a five year period, with ratable depreciation over 10 years. It also supports President Bush’s call to make the individual tax rate reductions permanent, which would benefit independent agencies that pay taxes at personal rates (“S” corporations), as well as the elimination or significant reform of the estate tax.
“Insurance agents and brokers, and all small businesspeople, need comprehensive tax reform now,” Symington says. “Tax reform will help them grow their businesses, hire more employees, and pass on their agencies to their families when they decide to retire. Common-sense reforms to the tax code will benefit independent agents and brokers across America.”
- Legal Reform—Independent agents and brokers will continue their push for much needed reforms to the current litigation system for claims related to asbestos exposure and medical malpractice cases.
“It is time to bring common sense to our legal system, for the sake of businesses and consumers,” Symington says. “Asbestos claims, many of them of questionable legal merit, continue to clog the courts. Medical malpractice actions have become so common that their costs are driving good doctors out of business. The enactment of class-action reform was a great step forward, and now we need to continue the job.”
- Natural Disaster Legislation—The active hurricane season of 2005 reiterated the need for comprehensive natural-disaster legislation in Congress. There are currently four bills on the subject introduced in Congress and two general approaches: the creation of a federal reinsurance program or allowing insurance companies to set aside tax-free reserves for certain catastrophic risks.
“The Big ‘I’ will continue to support federal legislation that leads to greater availability of coverage for catastrophic risk and better markets for consumers,” Symington says. “We will also work with others in the insurance marketplace to reach consensus on an approach to deal with this national problem.”
This will also be an important issue at the state level, as many states will continue to consider catastrophe-related issues. States likely will look at such issues as enhanced building codes (and the enforcement of such codes) in disaster-prone areas and other ways to promote mitigation before catastrophes strike. In some states, there will be debates about the need for state or regional catastrophe funds, modeled after similar funds in place in Florida and California. State regulators and the National Association of Insurance Commissioners (NAIC) are expected to be active participants in the state and federal debate, and the NAIC is currently working on its own comprehensive proposal.
“The Big ‘I’ supports legislative and regulatory efforts that restore healthy competition, bring insurers back to threatened areas, promote mitigation and effective planning, and take other meaningful steps to ensure that communities are better prepared for future catastrophic events,” Bissett says. “There are no easy answers, but we will remain an active participant in these important policy discussions.”
- Flood Insurance Reform—The Big “I” supports H.R. 4320, the National Flood Insurance Program Commitment to Policyholders and Reform Act of 2005, introduced by House Financial Services Committee Chairman Mike Oxley (R-Ohio) and Ranking Member Barney Frank (D-Mass.). It contains a number of the 22 reforms suggested in a comprehensive flood modernization agenda released by the Big “I”. (Click here to see the Nov. 11, 2005, release.) Chief among these are the addition of optional business interruption coverage on commercial policies, increases in the maximum coverage limits, and the inclusion of additional living expenses coverage for residential policies.
“This legislation will create many needed reforms that will assure the solvency and effectiveness of the National Flood Insurance Program for many years, and also help consumers by providing new levels of coverage, such as business-interruption insurance,” Symington says. “This bill is good for the NFIP and for policyholders across the nation.”
- Health Care Reform—Independent agents and brokers will continue to seek increased access to health insurance to help the uninsured obtain the coverage they need. Recent progress in the area of consumer-driven health plans is very promising and the Big “I” will continue to work with Congress and the Bush Administration to improve the nation’s health delivery system.
“Approximately 45 million Americans have no health-care coverage, and a solution is long overdue,” Symington says. “We will support legislation that will provide more health-care options, not only for the good of our members, but for the entire nation.”
- Data Security—Independent agents and brokers will continue to push for legislation that will address this issue while making sure any national standard is not burdensome; any enforcement of the standard should be done through state insurance regulators.
- Producer Compensation Disclosure—Very few states enacted any legislation in this area in 2005, and even fewer (perhaps none) are likely to do so in 2006. The educational efforts undertaken by the Big “I” in 2005 were well-received by state legislators and helped prevent knee-jerk policy responses in the wake of the Marsh scandal.
“No state adopted the NAIC's disclosure model in 2005, and the states that did act largely followed the tailored and more appropriate recommendations of NCOIL,” Bissett says. “The Big ‘I’ will remain vigilant on this issue and will work closely with policymakers wherever debate arises.”
Founded in 1896, the Big “I” is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer property and casualty insurance, employee benefit plans and retirement products. Web address: www.independentagent.com.