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                                                Big “I” Association News

On the Hill
House Passes Massive Financial Services Package
Big “I” scores several victories in financial services overhaul bill.

Last Friday, the U.S. House of Representatives passed H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009. The massive 1,300-page bill combines nine bills previously reported by the House Financial Services Committee with the intent of addressing the issues that caused the financial crisis. The package contains the following bills:

1. The Financial Stability Improvement Act
2. The Credit Risk Retention Act
3. The Corporate and Financial Institution Compensation Fairness Act
4. Over-the-Counter Derivatives Markets Act
5. Consumer Financial Protection Act
6. Private Fund Investment Advisers Registration Act
7. Investor Protection Act
8. Federal Insurance Office Act
9. Nonadmitted and Reinsurance Reform Act (previously passed by the House)

Of these nine bills, the one that has the most impact on independent insurance agents is the Federal Insurance Office Act of 2009, which the House Financial Services Committee recently passed after substantial changes were made to address concerns that were raised by the Big “I” and others.
In a major win for the Big “I,” an important amendment offered during the Financial Services Committee consideration by Chairman Paul Kanjorski (D-Pa.), Rep. Travis Childers (D-Miss.) and Rep. Erik Paulsen (R-Minn.) received unanimous support. The amendment specifically excludes all agents and brokers from mandatory data collection by the Federal Insurance Office (FIO). Without this amendment, the newly created FIO would have inadvertently had the ability to require countless agents, brokers and adjusters to produce any data and information that the FIO might demand, thus it was a top priority for the Big “I.” The association applauds Reps. Childers and Paulsen, along with Rep. Judy Biggert (R-Ill.), for their work on improving the bill.

Another noteworthy bill included in the package is The Consumer Financial Protection Act of 2009 which establishes a separate Consumer Financial Protection Agency (CFPA) to address consumer protection issues with financial products. The legislation would separate such oversight from financial supervision. The Big “I” worked in partnership with NAIFA, the CIAB, the company trades and individual carriers so that the business of insurance was excluded from the CFPA’s jurisdiction and is pleased that the final House language does not include insurance.
     
The Financial Stability Improvement Act of 2009 could also impact the insurance market as it would create a Financial Services Oversight Council with state insurance regulators having a non-voting seat on the council. This council would exercise heightened oversight of very large financial services institutions that are deemed to be systemically risky (seen as posing a systemic risk to the overall economy). The Big “I” has worked closely with the property-casualty company trades in arguing that p-c insurers, even the largest ones, should not be considered systemically significant. The bill also requires firms (including insurance companies) with assets of more than $50 billion to pay into a pre-event fund designed to aid in the resolution of these troubled companies designated as systemically significant.
  
During House floor consideration of this huge legislative package, more than 36 amendments were considered and most were adopted. The most contentious amendment was offered by Rep. Walt Minnick (D-Idaho) and would have replaced the highly-controversial CFPA with a council made up of the heads of existing banking regulators (rather than creating a new federal regulator). This amendment was strongly opposed by Chairman Frank and Democratic leadership and ultimately failed by a vote of 208-223.

The Wall Street Reform and Consumer Protection Act faces an uncertain future, as the Senate Banking Committee has yet to consider its version of the legislation with talks just underway.

Of course, the Big “I” will work with the Senate Banking Committee and other Members of the U.S. Senate as the legislation is considered in that chamber next year.  

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.

On the Hill
Senate Presses to Pass Health Care Reform Before Christmas
White House hopes for a mid to late-January bill signing.

Today, the Senate will embark upon day 18 of debate on its health care reform bill. Over the course of the last two-plus weeks, much of the real work has occurred outside of the Senate chamber where Senate Majority Leader Harry Reid (D-Nev.) has attempted to craft a compromise on the public option that garners the necessary 60 votes to pass the chamber without facing a possible filibuster. 

The wheeling and dealing on the public option came to an apparent close on Dec. 14, when Reid announced that he was going to drop the public option as well as the Medicare expansion to those between the ages of 55 and 64 years old. The Medicare expansion had drawn fire from both sides of the aisle, as well as from national trade associations representing hospitals and doctors. 

Now that the public option and Medicare expansion have been removed, the Senate Democratic Leadership is on the brink of attracting 60 votes, all of which are expected to originate from their caucus, and proceed with a vote on final passage as early as Christmas Eve. At press time, the likelihood of a vote prior to Christmas is fading, meaning the Senate may be faced with returning in late December to finish consideration of health care reform.

Pending Senate passage of health care reform, the House will be faced with three choices: Pass the Senate bill; Amend the Senate bill and ship it back to the Senate; or call for a formal conference committee to negotiate a compromise that the House and Senate will then vote on. Option one would expedite the legislative process and put a bill on President Barack Obama’s desk by mid to late-January. Options two and three would prolong the process and potentially complicate the fragile Senate compromise.

From a political perspective, the White House hopes to have a bill signed by the president prior to his State of the Union address in late January, but that deadline could slip if the House chooses option two or three. 

Regardless of which adventure the House picks, health care reform will remain unfinished as the clock strikes midnight on New Year’s Eve and 2010 begins.

Joe Wall (joe.wall@iiaba.net) is Big “I” senior director of federal government relations.




VIEW: P-C Trends
Quick Takes from the Top: A 2010 To-Do List
Big “I” President & CEO Bob Rusbuldt weighs in on 2009 challenges—and 2010 opportunities. 

I’m glad to have 2009 in the rearview mirror—and ready to welcome in 2010.

It has clearly not been a good year for the insurance industry, independent agencies or our nation's economy. Challenges abound everywhere. However, the good news is that it will get better!  Independent agents are resilient and resourceful, and we have endured greater challenges in our long and storied history.

The soft market, action on Capitol Hill, a lackluster economy and other obstacles will continue into 2010. But we will overcome both the short and long-term challenges facing our industry, the independent agency system and our national economy.

We have just endured a period of "negative growth" in premium—something that hasn’t occurred in recent memory. According to ISO, the property-casualty industry had negative 4.2 percent growth in first-half 2009—the weakest for any first half period since the start of ISO’s quarterly financial data for the property-casualty industry. But independent agents are poised to capitalize on the inevitable rebound because we are Trusted Choice^® advisors who offer choice, customization and advocacy to consumers. Our competitors can’t match our value proposition.

Congress is presenting independent agents with a full agenda—issues that that could fundamentally affect the way agents do business. From health care reform to significant tax increases to insurance regulatory reform, right now Capitol Hill is considering issues that are crucial to agency success.  We advocate every day for agents in Washington while our state associations work in state capitals.  The greatest threat to agencies is unchecked legislators and regulators. We must remain vigilant in order to create an environment where independent agencies can grow and thrive.

The Big “I” continues to be an industry leader and members are turning to us in tough times. We are a resource for agents day in and day out in a host of ways. Trusted Choice^®, InVEST, the Agents Council for Technology (ACT), Young Agents, Diversity initiatives, the Virtual University, Best Practices, Big “I” Markets, Agency E&O, the Big “I” flood program, Independent Agent magazine, Insurance News & Views, legal advocacy, company advocacy, legislative advocacy, Future One, InsurPac, the new Consumer Agency Portal (CAP) initiative, InsurBanc…all of these programs are designed to help agents be more successful, profitable and efficient.

Join with your national and state associations in 2010 to protect and promote your profession and your business.  There is strength in numbers, and only through the activism of every agency employee will we be able to help take the independent agency system to the next level of success.

2009 is history—thank goodness —and 2010 presents new opportunities.  Let's seize them together!
 
Bob Rusbuldt (bob.rusbuldt@iiaba.net) is Big “I” president & CEO.


On the Hill
House Makes a Move as NFIP Expiration Approaches
Race against the clock is once again underway as tomorrow’s midnight expiration nears.

The National Flood Insurance Program (NFIP) is set to expire at midnight, Dec. 18. And, once again, Congress is rushing to pass an extension as insurance agents and consumers worry about what happens if one isn’t passed in the nick of time.

Yesterday, the House passed an extension as part of H.R. 3326, the Department of Defense Appropriations bill, which will extend the program until Feb. 28, 2010. The Senate is expected to follow suit today with the president signing it into law before the deadline.

This is the fourth time, in 2009 alone, that the flood insurance has faced imminent expiration only to be saved at the last minute by short-term extensions passed by Congress. In late October, Congress passed legislation to temporarily extend the NFIP until Dec. 18 and President Barack Obama quickly signed it into law. The October extension was part of a series of puddle-hopping extensions that have prevented the program from expiring but have not made any changes. Another short-term extension was signed by President Obama just hours before the program was set to expire at the end of September. Last spring, a similar extension was passed.

Although the Big “I” appreciates the work by Congress and President Obama for short-term extensions, the association strongly feels that a longer term extension coupled with reforms of the NFIP are urgently necessary. The association strongly supports an increase in maximum coverage limits and the addition of optional business interruption insurance. Homeowners and businesses need both higher coverage limits and business interruption insurance in order to properly insure their homes and businesses.

In the 110th Congress, the Flood Insurance Reform and Modernization (FIRM) Act of 2007 made progress in the House and Senate. The legislation would have extended the program for five years and made significant and needed reforms to help put the program on sound financial footing. This summer, similar legislation was introduced in the House of Representatives.

The Big “I” continues to call for more permanent reforms, verses the temporary extensions that have kept the program alive. The association believes this “Groundhog Day” approach of last-minute extensions is causing significant uncertainty in the marketplace, and it will continue to actively lobby for a long-term extension and real reform.

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs. 


Legal Advocacy
Court Opinion Explains Decision Against FTC in Red Flags Rule Lawsuit
Ruling in favor of lawyers offers hope that agents won’t be included in rule.

In a highly-anticipated, written opinion to supplement an Oct. 29 oral ruling in the American Bar Association’s (ABA) lawsuit against the Federal Trade Commission (FTC), the U.S. District Court for the District of Columbia soundly rejected the FTC’s arguments that lawyers are “creditors” subject to the identity-theft regulations, commonly known as the Red Flags Rule. The similarity of services offered by lawyers and insurance agents make the argument in the ABA lawsuit relevant to agents concerned about whether the FTC will attempt to construe the Red Flags Rule as extending to their activities.

The court stated in the decision that the Fair and Accurate Credit Transaction Act of 2003 (FACT Act)–the legislation that authorized the FTC to draft the Rule–was not “created as a means of eliminating all types of identity theft, but rather to eliminate a specific kind of identity theft: identity theft in the credit industry.”

The Red Flags Rule, slated for enforcement beginning June 1, 2010, is designed to fight identity theft by requiring creditors with certain kinds of accounts to implement compliance programs to detect and prevent identity theft.

The judge concluded in the opinion that the FTC “not only seeks to extend its regulatory power beyond that authorized by Congress, but it also untimely and arbitrarily selects monthly invoice billing as the activity it seeks to regulate.”  Although the FTC has not specifically listed everyone it considers subject to the Red Flags Rule, it has stated on its Web site that the definition of creditor covers all entities that regularly permit deferred payments for goods or services, and it specifically mentions lawyers, in addition to accountants, healthcare providers, utilities and telecommunications companies.

The inclusion of lawyers as creditors “came out of the blue,” according to the opinion, because “at no time in the rulemaking process did the [FTC] provide any indication that the definition of creditor was to include attorneys who invoice their clients.” The inclusion of lawyers as creditors was not the product of notice-and-comment rulemaking and therefore did not include deliberation or comment from the public, the judge wrote, and it is not supported “by anything other than post hoc rationalizations.”

The court also noted that “state-level authorities have, throughout the history of our nation, regulated the conduct of attorneys, not the federal government.” The judge went onto say that “Congress does not tend to interject itself into an arena where it hasn’t generally ventured without explicit explanation hoping that the states will not notice the usurpation of their authority.” This regulation at the state level is similar to how insurance agents have traditionally been regulated and, like lawyers, insurance agents were not identified in the rulemaking process as intended to be covered by the identity theft rule.

As previously reported in Insurance News & Views, the American Institute of Certified Public Accountants (AICPA) filed a complaint against the FTC on Nov. 10 in the U.S. District Court for the District of Columbia similar to the one filed by the American Bar Association, with many of the same arguments asserted for why accountants should not be subject to the Red Flags Rule. There has been no oral or written decision issued yet in that lawsuit.

The Big “I” will continue to monitor any appeals, responses or other developments about the ABA and AICPA cases, as well as any other lawsuits/regulatory actions that may be filed about the application of the rule, and will report on anything that may affect its application to independent insurance agencies.

Each insurance agency operates differently and thus needs to assess the definitions under the rule to determine whether it must comply. The Big “I” summary of the rule is in a memo titled, “Overview of the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, and the Drivers Privacy Protection Act,” starting on page 10 at letter G. This memo is available to Big “I” members who log in to www.independentagent.com and select Legal Advocacy, under Memoranda and FAQs.

Scott Kneeland (scott.kneeland@iiaba.net) is Big “I” counsel.