This week I am happy to introduce you to one of my
colleagues as a guest columnist: Justin W. Smith. He has just
returned from the annual AALU meeting, with the following perspective on our
What will our legacy be?
Last week I took time out from the daily activities in the field
to attend the 55th annual meeting of the American Association of Life
Underwriters (AALU) in Washington D.C. The
meeting reinforced the fact that we hold the keys in determining what legacy we
will leave for the next generation of life insurance professionals.
Let’s face it; most prospects and their advisors are
unfamiliar with the products we sell, how they work, when and how benefits are
paid and the tax-treatment of life insurance and annuities. Many are actually
misinformed, or have allowed perceptions and assumptions about the products
govern their mindset. Why should we
believe that our representatives and their staffers in Washington D.C. are any
better versed about our industry and products?
The reality is that their understanding and knowledge of the industry is
not too different than most prospects; they are in need of education.
Nearly 80% of Americans disapprove of the job our Congress is
doing. It appears that the
anti-incumbent mood is likely to continue through the next election and that
many new faces may be headed to Washington D.C. in January. Additionally,
the likelihood that any real legislation affecting tax reform gets enacted
during this election year is almost zero.
The representatives seated in the 113th United States Congress will undoubtedly be debating and
implementing some level of tax reform. In an environment when the United
States Government debt is at an all-time high, and Congress is running annual
budget deficits, be assured that the they will be seeking revenue from
all sources, including the tax-treatment of “inside build-up” in life
insurance and annuities. The fiscal mess our country is in is
unprecedented, and it is not unreasonable to believe that tax reform
potentially enacted by the 113th Congress could be unprecedented as well. The
impact on our industry and individual businesses could be profound.
all have a part to play in shaping the conversation around tax reform.
Our part goes beyond educating clients and their advisors, to actively
participating in the education of our representatives. Leadership has to
come from within our industry on this incredibly important front. There is no better voice than ours to articulate
the positive impacts that the current tax treatment of life insurance affords
consumers, our society and the US economy.
As you contemplate our industry’s role in our society and economy,
consider these facts:
life insurance industry is one of the largest sources of investment capital in the
nation with $4.5 trillion invested in the U.S. economy.
year-end 2009, life Insurance companies purchased more than 23% of Build
America Bonds, issued by state and municipal governments as part of the
American Recovery and Reinvestment Act, and increased overall bond holdings by
2009 and 2010 life insurers’ investments helped finance the construction of 131
new schools and 6,600 new classrooms in one major metropolitan area alone.
insurers are the largest single source of bond financing for American business,
holding 16% of all U.S. corporate bonds.
life insurance industry generates approximately 2.5 million jobs in the U.S.
insurance provides financial security to 75 million American families.
life insurance industry pays $1.5 billion per day to American families and
business, compared to $1.9 billion per day by Social Security.
insurance policies provide $18 trillion of death benefit protection.
insurance products provide for 20% of Americans’ long-term savings.
Clearly, our industry is an essential component in the fabric of
the growth of our economy, making long-term investments to match our long-term
promises. In a time when seemingly every institutional investor is
chasing returns, the life insurance industry is serving as bedrock for
long-term economic and job growth in the U.S.
Investments made by life insurers result in repaired and new
infrastructure, new schools and classrooms, and countless other local projects
throughout the United States.
Our products are savings vehicles for millions of Americans and
provide financial stability for families when they need it most. Now, imagine your business under a tax regime
that taxes your clients annually on the gain of cash value inside a life
insurance policy. How much less
insurance would be sold? What would the
impact on an insurer’s ability to invest in our economy be? The indirect effects of such tax policy could
yield catastrophic results for consumers, the industry and our economy. Is that the legacy we are prepared to leave
to the next generation?
We have a lot to be proud of as life insurance
professionals. Our efforts make a significant positive difference in the
lives of our clients and their families each and every day in addition to the indirect
impact on the foundation of the American economy. We should not take the tax treatment of life
insurance for granted, particularly in these unprecedented times.
We have the obligation and opportunity to participate in educating
our elected members of Congress on the merits of our products and industry and
the far reaching consequences that an historic change of posture towards life
insurance and annuities would yield. It should not be assumed that these
facts about our industry are widely known or that the story will be told by
someone else. Whether AALU, NAIFA, NAILBA, ACLI, or any other advocacy
group, there is a conduit available to participate in, get up to speed on the
current debates, and to get involved.
These organizations are comprised of us; the responsibility is
Let’s take action with the same energy and passion with which we
educate our clients and advisors and bring that education to our candidates for
and members of the 113th Congress. When the dust finally settles and tax reform
is ultimately debated, voted on and implemented, our legacy relative to the tax
treatment of life insurance will have been determined.