NAILBA Perspectives Perspectives Summer 2018 - Page 21

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