THE DIRECT CONNECTION BETWEEN ADVOCACY AND YOUR BOTTOM-LINE

1. THE DIRECT CONNECTION BETWEEN ADVOCACY AND YOUR BOTTOM-LINE NAIFA- SOUTHEAST WISCONSIN MARCH 10th, 2009 BY: TERRY K. HEADLEY LUTCF, FSS, LIC NAIFA SECRETARY

2. 2009 ECONOMIC AND POLITICAL REALITIES • There is no such thing as a Neutral Piece of Legislation – ALL Legislation produces either winners or victims • 1/3 of all Tax Expenditures, as identified by the Joint Committee on Taxation, fall within the Insurance and Financial Services Industry. (Examples of Top 5) • $1.65 Trillion of “Lost Revenues”-- Offsets”—Next 5 Years As Scored By Joint Committee On Taxation • As an Industry, we are at substantial risk. ($455 Billion 2008 Fiscal Year Federal Budget Deficit versus $400 Billion transferred Tax-Free to Policyholders, Annuitants, and Beneficiaries by our Industry).

3. JOINT COMMITTEE ON TAXATIONTAX EXPENDITURES FOR FISCAL YEARS 2007 - 2011 Top IndustryRevenue Lost Tax Expenditures(In Billions) Tax-Deferred Cash Value of Life Insurance /Annuities $150.9 Insurance Company Reserves $ 10.7 Qualified Dividends/Long-Term Capital Gains $631.9 Capital Gains at Death $279.9 Cafeteria Plans $185.5 Employer Provided Health/LTC Insurance $628.5 Self-Employed Health/LTC Insurance $24.3 Health Savings Accounts $ 4.6 Pension Contributions and Earnings-Employers $607.3 IRAs $94.1 Keogh Plans $54.5 Employer-Provided Life Insurance $13.3 Employer-Provided Accident/Disability Insurance $15.3 TOTAL $1.65 Trillion

4. ADVOCACY • FEDERAL ISSUES • “The Gathering Storm” Tax Fight • Pay-Go Rules • Re-Regulation vs. OFC • Obama/Baucas Estate Tax Proposal • Deferred Compensation • Rule 151A • STATE ISSUES • States are “Revenue-hungry” • STOLI

5. NAIFA’S Winning Formula • The 3-Legged Stool Approach To Advocacy • Professional Lobbyists—Federal & State • IFAPAC—Largest In Industry--$3 M Per Year • APIC—Grassroots Constituent Lobbyists • We have voice, clout, and influence beyond compare • NAIFA’S Unique Franchise—We have a Member Constituent In Every Federal Congressional and State Legislative District in the Country, Who is a Voter, a Taxpayer, and a Job Creator

6. PERMANENT ESTATE REPEAL VERSUS RESPONSIBLE ESTATE TAX REFORM • Three (3) Thin Threads of Life Insurance • Tax Free Death Benefit – IRC Section 101(a) • Tax Deferred Inside Build-Up • Ability to remove the Proceeds from the Insured’s Taxable Estate • Potential Repeal of Stepped-Up Basis of Capital Assets

7. LIFETIME SAVINGS ACCOUNTS AND HOW THEY WILL COMPETE WITH PERMANENT LIFE INSURANCE AND LONG TERM ACCUMULATION VEHICLES Three (3) Twisted Sisters (LSA’s, RSA’s, ERSA’s)

8. THE GREATEST THREAT – PAYGO RULES • Life insurance and annuity cash values get about $29 billion in favorable tax treatment per year. Employers get a tax break in the range over $100 billion a year for employee health insurance. Self-employed persons get the same break in the amount of approximately $5 billion per year. Employer group life and disability insurance is worth over $5 billion a year in tax breaks. And, employer and individual contributions to various retirement plans runs in excess of $150 billion of tax breaks a year. • Eliminating the AMT will lose about $50 billion a year in tax revenue. If the Pay-Go rule says Congress must raise $50 billion in new tax revenue to offset the $50 billion lost by repealing the AMT, where is Congress going to get it?

9. NAIFA’s THEMES & CONDITIONSFOR SUPPORT OF THE CONCEPT OF AN OPTIONAL FEDERAL CHARTER FOR INSURANCE • True Agent Choice • Federal Insurance Legislation Shall: • Permit producers to choose federal or state regulation • Prohibit companies from discriminating against a producer based on his or her choice of federal or state regulation • Address producer regulation for all major lines of insurance

10. Enhanced Consumer Protections • Federal Insurance Legislation Shall: • Encompass the NAIC’s model Unfair Trade and Unfair Claims Settlement Practices Acts • Adhere to generally accepted replacement regulations • Include file and use of rates with appropriate regulator review and approval of products • Maintain ability of insurers to share loss, underwriting and trending data • Not exceed the 2004 NAIC standard for insurance commission disclosure • Ensure adequate solvency standards for insurers • Include regulator responsiveness and accessbility to consumers

11. Single Federal Voice & Preserve State Regulation • Federal Insurance Legislation Shall: • Provide a single, comprehensive regulatory structure for all producers who opt for federal regulation • Include a federal entity with expertise in insurance to weigh in on national and international policy with regard to insurance. • Provide producers with a position at the table when new regulations are being considered by the national insurance regulator • Allow for creation of a new self regulatory organization (SRO) to address insurance and/or securities issues • Allow for increased efficiencies and cost savings for our members • Create a federal insurance regulator who is the sole regulator of insurance for federally licensed entities – not any other federal body • Be cost neutral to the states • Promote cooperation between state and federal regulators • Not impede the operation or expansion of the Interstate Insurance Product Regulation Commission (Interstate Compact) or other efforts to improve state insurance regulation • Fully preserve McCarran-Ferguson antitrust exemption for state regulation of insurance

12. THE LATEST DEVELOPMENTS FOR PRODUCER COMMISSION DISCLOSURE REQUIREMENTS “To Fee or Not to Fee” - - That is the Question

13. NAIFA and COALITION “SAFE HARBOR” LANGUAGE • Subsection A(1) shall not apply to an insurance producer who: • Does not receive compensation from the customer for the placement of insurance; and • In connection with that “placement of insurance” represents an insurer that has appointed the producer; and • Discloses to the customer prior to the purchase of insurance: • That the insurance producer will receive compensation from an insurer in connection with that placement; or • That, in connection with that placement of insurance, the insurance producer represents the insurer and that the producer may provide services to the customer for the insurer.

14. “THERE ARE 75 MILLION OF US” • 75 Million American Families count on the life insurance industry to protect their financial future. • LIFE IS UNPREDICTABLE – American families turn to life insurance, annuities, long-term care and disability income insurance. – Whether acquired individually or at work, the basic fact remains the same: Life insurers’ products help protect 75 million American Families again economic uncertainty – providing peace of mind, long-term savings and a guarantee of lifetime income when its time to retire