Agents, brokers ready to pursue ambitious legislative agenda in 2007

There is a new political dynamic in Congress that presents both opportunities and pitfalls.

Last year, the President signed into law pension and health care reform that will greatly benefit insurance consumers. House passage of a surplus lines bill illustrated that the industry can come together and support a bipartisan, targeted regulatory reform approach.

For the new Congress, the legislative agenda for agents and brokers includes several important items, such as a more accurate depreciation schedule of intangible assets for small businesses, addressing natural disaster coverage and more. There will be a shift in fundamental philosophies on the Hill and in many states, and that pragmatism is what rules the day on difficult legislative issues.

Following are what the Independent Insurance Agents and Brokers of America (the Big “I”) sees as the primary issues for agents and brokers in 2007.

Producer Licensing — The Big “I” wants all jurisdictions to issue and renew producer licenses on a reciprocal basis and to implement uniformity. Many states claim to have enacted reciprocity and other reforms in the early part of the decade, but they have not produced meaningful results for many agents.

The association supports targeted federal legislation to streamline the licensing process and to implement uniformity. A key objective 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. Those duplicative requirements hinder an agent’s ability to serve customers.

Producer Compensation — No state has banned incentive compensation payments. Yet some state attorneys general are usurping the authority of state regulators and legislators, and using legal settlements as vehicles for imposing costly and unnecessary requirements, and altogether banning forms of legal incentive compensation.

The association plans to fight for legal compensation methods and to educate decision-makers on this issue.

Insurance Regulatory Reform — The Big “I” supports targeted federal legislation, or “federal tools,” to reform the current state-based regulatory system without creating a federal regulator or optional federal charter. The association expects to work with leadership in the House Financial Services Committee and the Senate Banking Committee.

Terrorism Insurance — With the Terrorism Risk Insurance Extension Act (TRIEA) set to expire on Dec. 31, 2007, renewal or extension of a federal backstop for catastrophic terrorist acts is a priority. The uncertainty in potential terrorist attacks makes such events effectively uninsurable. A federal backstop is necessary to prevent significant economic disruption.

Flood Insurance Reform — House and Senate leadership have indicated flood insurance reform will be a priority. The Senate Banking Committee took action on, and the House passed, the Flood Insurance Reform and Modernization (FIRM) Act in 2006. The association remains committed to reforming the National Flood Insurance Program (NFIP) to ensure the program’s solvency and to protect consumers.

Natural Disaster Legislation — The active hurricane season of 2005 on the insurance market led the 109th Congress to consider two general approaches: the creation of a federal reinsurance program and the ability of insurance companies to set aside tax-free reserves for certain catastrophic risks.

This will continue to be an important issue at the state level. As in 2006, states are likely to look at state or regional catastrophe funds, enhanced building codes (and the enforcement of such codes) in disaster-prone areas and other ways to promote mitigation before catastrophes strike. Debates are expected on the need for state or regional catastrophe funds, modeled after funds in Florida and California.

Crop Insurance — Independent agents will oppose federal funding for Premium Reduction Plans (PRPs). Congress agreed to the defunding of this program in 2006 because of issues with PRPs that are contrary to consumers’ best interests. PRP rebating would allow rebates to be offered to farmers in some states but not others, contrary to federal regulations prohibiting discrimination in favor of farmers in any state at the expense of farmers in other states.

Tax Reform — Language was introduced in the House this month, as part of H.R. 46, that would amend the current tax code to allow a more accurate depreciation schedule for intangible assets, such as customer lists, when they are acquired in the purchase of small businesses, and 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.

Tax reform will help insurance agents and brokers, as well as thousands of small businesses, grow their businesses, hire more employees and pass on their agencies.

Data Security — Independent agents and brokers will push for legislation that will address this issue while ensuring any national standard is not burdensome, and enforcement of the standard is done primarily through state insurance regulators.

Health Care Reform — Independent agents and brokers will seek increased access to health insurance to help the uninsured obtain coverage. The Big “I” supported the enactment of the Tax Relief and Health Care Act of 2006, which includes provisions designed to improve the operations of Health Savings Account (HSA) plans. The industry looks to build on this legislation.

Robert A. Rusbuldt is CEO of the Independent Insurance Agents & Brokers of America (the Big “I”). Web site: www.independentagent.com.