Tax reform, healthcare and financial services regulatory reform were the most compelling story lines as insurance agents and financial advisors convened in September.
What's on the mind of the insurance industry these days?
The National Industry Conference and Exhibition, held in September, had many of the answers, as members of the National Association of Insurance and Financial Advisors gathered in Washington, D.C. NAIFA comprises more than 600 state and local associations, representing the interests of approximately 200,000 agents and their associates nationwide. Atop the agenda: tax reform, healthcare and financial services regulatory reform. More specifically: the impact of healthcare and financial services regulatory reform on agents' businesses and the role of agents in helping consumers secure long-range financial security in today’s economic environment.
Consequently, a peek into the topics of their conference sessions could offer revealing insights for any consumer.
“Our industry has several very important topics to address, and each has a direct effect on consumers across the region and the nation,” says Heath Ritenour, CEO of Longwood-based Insurance Office of America, one of the fastest-growing independent insurance agencies nationwide.
The hottest topics:
Tax Reform and Deficit Reduction
Federal tax rules provide important incentives for Americans who use insurance, annuity and employee benefit products to mitigate such risks as disability or premature death. Yet, Congress faces pressure to reduce the budget deficit, and some legislators are characterizing pension plan contributions; flexible spending accounts; health savings accounts; employer-provided health, disability and long-term care insurance; and the inside buildup of life insurance and annuities as “tax expenditures.” This is a potential battleground, with organizations such as NAIFA working to educate Congress on the importance of risk-transfer products and to emphasize to its members the historical role of these products in providing benefits to society.
Health and Employee Benefits
The scope of the new healthcare law is broad, and many of its provisions are being reevaluated by Congress. Meanwhile, groups are actively seeking bipartisan modifications to some of the law’s provisions, including these:
- Removing agent compensation from the medical loss ratio (MLR) calculation to ensure that insurance professionals remain in the system to assist consumers;
- Repealing the 3.8 percent tax on unearned income (including annuities);
- Repealing the new federal long-term care program that some people deem a “flawed and unsustainable” approach to addressing Americans’ long-term care and disability income needs;
- Instituting a meaningful mechanism to discourage healthy individuals from waiting until they are ill or injured to buy coverage;
- Ensuring that individuals buying health insurance through exchanges have access to cost-saving Health Saving Accounts (HSAs);
- Repealing the FSA contribution limits to provide relief for individuals with high healthcare expenses;
- Establishing better cost-control measures to ensure the affordability and sustainability of private insurance choices.
Financial Services Regulatory Reform
Implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act is a major focus of insurance groups, which are concerned that the economic impact of “excessive and duplicative regulation” will bring higher costs for consumers and reduce affordable advice and services for middle-income Americans. Dodd-Frank, signed into law by President Obama last year, is designed to protect consumers and promote financial stability by improving accountability and transparency in the financial system.
Regarding securities regulation, the industry's chief concern is the potential impact on mid-market consumers of a likely SEC rule that would impose a fiduciary standard of care on registered representatives. The industry is also actively engaged on proposed amendments to SEC Rule 12b-1, potential new broker-dealer disclosure requirements, municipal advisor registration requirements and the SEC’s new “pay-to-play” rule.
In addition, regarding retirement savings regulation, the U.S. Department of Labor proposed an expanded definition of fiduciary, which would apply to anyone who provides investment recommendations to employee benefit plan sponsors or participants, or even to IRA holders. The proposal would subject brokers for IRA accounts to fiduciary regulations under the Employee Retirement Income Security Act for the first time and could increase costs for people saving for retirement. The insurance industry is hoping to persuade the Department of Labor to remove IRAs from the proposed definition and to ensure that consumers don't lose access to affordable professional investment education and guidance.
In the wake of the economic recession, middle-income clients of financial advisors have become more interested in products with risk-protection components, according to a new survey of National Association of Insurance and Financial Advisors members. The trend is particularly pronounced among investors nearing retirement age, with more than eight of 10 advisors surveyed saying that clients in this group are seeking products that will protect their investment principal in a down market.
In the survey of 914 NAIFA members, 84 percent said that clients nearing retirement age are more interested in products with risk-protection components, while 57 percent said that clients under age 40 are more interested in those types of products. When asked if the financial crisis has affected the types of products and services their clients are looking for, 7 percent said the crisis has had no impact on the investment choices of clients nearing retirement age, and 28 percent said it has not affected the choices of clients under age 40.
Also, 44 percent of advisors surveyed said their typical client nearing retirement age has less than $500 a month to invest. And nearly nine in 10 advisors said their clients under age 40 have less than $500 a month to invest.