Thursday, November 5, 2009

Life insurance industry: Investor Protection Act still needs work

life insurance

Life insurance producer advocacy groups celebrated the House Financial Services Committee’s approval yesterday of the proposed Investor Protection Act, but stressed the bill still doesn’t go far enough in protecting commissioned-based insurance sales agents.

Representatives of advocacy groups such as the Association for Advanced Life Underwriting and the National Association of Insurance and Financial Advisors said they are pleased that under the proposed bill, registered representatives who are contractually obligated to sell only a limited basket of products cannot be held in violation of fiduciary duty for that reason.

“We were glad to see that the provisions relating to the standard of care were modified by the committee in a variety of ways to try to protect the tremendous role played by life insurance agents and commission-based sales professionals,” said Tom Korb, vice president of policy and public affairs at the AALU.

There is still more work to be done, said Thomas D. Currey, president of NAIFA. “We fear there’s a bias against commissioned salespeople that can be problematic for us down the road at some point,” he said.

Specifically, Mr. Currey noted that while there was no specific language banning commissions, the act’s language does not preclude the Securities and Exchange Commission from limiting the way producers can be paid in the future.

“We think this is game-changing legislation for the financial services industry,” he added.

Among other provisions, the bill would give the Securities and Exchange Commission new enforcement powers, including the ability to offer bounty money to whistleblowers on fraud cases and the ability to bar and the power to bar violators of the law from employment in any securities-related industry. It would also double the SEC's budget over the next five years. The bill will now go to the full House.