legislative update
Uncertainty in a World that Values Certainty
T
MARK VALENTINI, MPP
he insurance world, be it
life, health, property & ca-
sualty, or annuities, revolves
around certainty and risk, where ev-
ery effort is put into maximizing the
former while minimizing the latter.
When it comes to elections, lawmak-
ers on Capitol Hill try to emulate
this very business model though
they definitely have not mastered
it on a level comparable to many
of the underwriters with whom you
work. For political hacks like me, we
relish in the excitement but often
worry about how election outcomes
impact the people we represent.
NAILBA friends who I served in
the past and are familiar with my
personal political leanings will know
how difficult it is for me to point out
that the current political environ-
ment has so far been pretty favor-
able for your industry. The Depart-
ment of Labor’s fiduciary rulemaking
would have turned out much differ-
ently had political circumstances
been different. Furthermore, when
it comes to the recently proposed
Regulation Best Interest (RBI for
you ball fans out there) from the
Securities and Exchange Commis-
sion, the Republican-majority SEC
proposed a rule that could have
been much worse for those of you
marketing variable products; not to
mention, there is still time for the
industry to weigh in with the SEC
which is currently much more likely
to be open to industry input than
it would have been under previous
administrations. The only exception
is arguably the estate tax provisions
that were included in the tax reform
bill passed at the end of last year
which, though not permanent, many
in the industry opposed.
However, with midterm election
season upon us it is difficult to pre-
dict whether this climate will remain
breezy and warm after November.
Recent history has shown that, with
the exception of 2004, the party
in power in the White House gen-
erally loses seats or otherwise un-
derperforms during midterms. This
is particularly true when looking at
the Republican wave of 1994 during
President Clinton’s first term, the
Democratic wave of 2006 during
President George W. Bush’s second
term, and the substantial losses
experienced by Democrats during
the Obama administration in 2010
and 2014 from which the party still
hasn’t quite fully recovered. There-
fore, if recent history is any indica-
tor, it is possible that Republicans
will lose seats and possibly control
of at least one half of the legisla-
ture.
What is driving this trend? A
rather unpopular president among
moderate and liberal voters who will
be driven to the polls in droves in
response to controversial policies
stemming from the administration
and Republican leaders in Congress.
While current polling indicates Sen-
ate Majority Leader Mitch McConnell
will narrowly hold on to his majority
in Congress, House Republicans have
seen over 40 retirements in compet-
itive districts that could give the
House majority back to Democrat-
ic Leader Nancy Pelosi. High voter
turnout generally favors Democrats,
and with the liberal base up in arms
over perceived rollbacks of the prog-
ress made under the previous admin-
istration, Republican leaders should
be concerned.
Will gains made by the industry be
stifled under a Democratic Congress?
Not necessarily, and for two reasons.
1) If you read my last column, most
of the scary things are happening at
the state level, particularly as the
NAIC and more specifically New York
State move toward more stringent
sales standards when it comes to
life insurance and annuities while
other states take matters into their
own hands related to the DOL rule.
2) Democrats have traditionally sid-
ed with the industry when it comes
to setting the estate tax at a certain
rate and exemption level rather than
the more conservative approach of
eliminating it altogether. In terms
of the gains the industry made with
regard to the DOL rule, it will take
time for Democrats to regain trac-
tion on that issue, especially since
the courts have already ruled on it,
and President Trump will remain in
the White House for at least two
more years.
For many industry stakeholders a
Democratic Congress may not be the
ideal arrangement, but the industry
has fared well under similar situa-
tions. During the Dodd-Frank debate
which occurred under a Democratic
administration with majorities in
both houses, we were able to reach
a compromise on a provision that
required an SEC study on standards
of care that supplanted a uniform fi-
duciary standard, thus allowing the
industry to continue the fight. The
Harkin amendment also established
recognition of fixed indexed annu-
ities as insurance products in states
that adopted NAIC suitability stan-
dards. Furthermore, there is a strong
message in promoting and reinforc-
ing working families through the
products you sell that resonates well
across the entire political spectrum.
Regardless of where you stand, be
sure to get out and vote this No-
vember.
Mark Valentini, MPP, is a federal lob-
byist and NAILBA’s former director of
government affairs.
www.nailba.org 21