PIA 2020 Legislative Priorities

About PIA National’s Advocacy Efforts The National Association of Professional Insurance Agents (PIA National) represents independent insurance agencies and their employee-agents in all 50 states, Puerto Rico, and the District of Columbia.

PIA National members operate cutting-edge agencies and treat their customers like neighbors, providing personal support and services.

PIA National represents members’ interests in state capitals and in Washington, D.C. to ensure that lawmakers and regulators understand and support the independent agency system. PIA’s grassroots campaigns, our annual PIA Advocacy Day, and our year-round advocacy efforts in Washington give individual agents a powerful collective voice in government.

PIA National works with insurance carriers and industry organizations— the National Association of Insurance Commissioners (NAIC), the National Insurance Producer Registry (NIPR), the National Council of Insurance Legislators (NCOIL), the Association for Cooperative Operations Research and Development (ACORD), and others—to ensure that the concerns of independent agents are addressed. Members have access to materials to strengthen their agencies and keep them up to date on evolving industry laws, regulations, and trends.

PIA Advocacy Day Legislative Priorities PIA National staff has reviewed past policy positions and current congressional priorities and consulted with PIA members across the country to develop its 2020 Legislative Priorities. While the items below are our top priorities, PIA National is always working to promote the interests of the independent agent, wherever those interests take us.

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Reauthorize the National Flood Insurance Program

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Create Cannabis Safe Harbor for Agents

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Make Permanent Tax Relief for Passthrough Entities

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Defend the State Insurance Regulatory System

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Protect Crop Insurance

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Additional Issues of Importance

PIA National supports a long-term reauthorization of the National Flood Insurance Program (NFIP) that recognizes the key role agents play in delivering the program to consumers.

PIA National supports legislation to protect agents, brokers, and insurers against federal criminal prosecution and civil liability for those who engage in the business of insurance with cannabisrelated businesses in states that have legalized cannabis in some form.

PIA National supports permanent tax relief for independent insurance agencies that organize as passthrough entities.

PIA National supports a modern, state-based insurance regulatory system and opposes federal regulation that threatens it. As such, PIA National supports the repeal of the Federal Insurance Office (FIO).

PIA National supports the vital role that independent agents play in the delivery of crop insurance and opposes cuts to it in the appropriations process.

PIA National is busy with countless issues in 2020 and beyond, including insurance data security and the implementation of the National Association of Registered Agents and Brokers (NARAB).

Reauthorize the National Flood Insurance Program PIA National supports a long-term reauthorization of the National Flood Insurance Program (NFIP) that promotes the gradual growth of the private flood insurance market.

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Reauthorize the National Flood Insurance Program

The NFIP was created in 1968 to provide property owners in the U.S. with flood insurance coverage for their homes. At the time, the private insurance market viewed flood as an uninsurable risk, and insurance products sold through the private market were costprohibitive or unavailable for this catastrophic peril. The NFIP has long been effectively the only means by which people can protect their financial interests against the risks posed by flooding. PIA National supports the reauthorization of the NFIP, as the program provides critical support to those affected by floods and coverage that the private market is currently still largely unable to supply.

The Role of the Independent Agent Independent insurance agents are vital in ensuring that property owners make educated choices about the purchase of flood insurance policies for their homes and businesses.

Agents generally serve as the first point of contact for a potential consumer inquiring about a flood policy. Assisting a consumer in buying an NFIP policy is a difficult process requiring specialized knowledge, and the purchasing process is very different from that of a standard homeowners or auto policy. Agents must be familiar with the ever-changing laws and regulations governing flood insurance coverage requirements. They must be conversant in the flood zones and maps for geographic areas in which they write, and they must be comfortable walking their customers through the lengthy and often bureaucratic process of obtaining an Elevation Certificate (EC).

Reauthorization The NFIP’s five-year reauthorization expired on September 30, 2017. Leading up to that deadline, Congress was unable to agree on reforms to the program. As a result, the NFIP lapsed briefly three times, and, since the 2017 deadline, has been subject to a total of 15 extensions. The program is now set to expire on September 30, 2020.

PIA National supports the two pieces of legislation that unanimously passed the House Financial Services Committee on June 12, 2019 to reauthorize and reform the NFIP: H.R. 3167, the National Flood Insurance Program Reauthorization Act, sponsored by Rep. Maxine Waters (D-CA), and H.R. 3111, the NFIP Administrative Reform Act, sponsored by Rep. Nydia Velazquez (D-NY). Together, these bills constitute a legislative package that is overwhelmingly bipartisan and should be passed by Congress.  

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The House NFIP legislative package includes many of PIA National’s priorities, including: The continuation of the WYO reimbursement rate at its current level of 29.9 percent; Continuous coverage protections necessary to policyholders who leave the NFIP to purchase a private flood policy and later return to the program; Allowance for policyholders to purchase additional increased cost of compliance (ICC) coverage and use it for pre-disaster mitigation; Increased funds for mapping and reform of maps for accuracy; The continuation of the gradual implementation of actuarially sound rates and grandfathering provisions as included in the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA); Consumer-friendly provisions for appealing mapping decisions; Improvements to aspects of the claims process; Creation of a Federal Flood Insurance Advisory Committee with insurance agent representation; and Strengthening of the disclosure requirements for standard flood insurance policies.

This provision will make the options for and limitations of a standard flood insurance policy clearer to policyholders and will include a disclosure acknowledgment page that will protect consumers and independent agents selling NFIP policies.

What is not included in the House Financial Services Committee-passed legislative package is equally as important: a cut to the Write-Your-Own (WYO) reimbursement rate. The WYO reimbursement rate is the vehicle by which insurance agents are compensated for selling NFIP policies. The NFIP reauthorization legislation that passed the House during the last Congress, in 2017, included a cut to the WYO reimbursement rate. Such a cut would force the WYO carriers to pass that reduction on to agents via a cut to their commissions. In turn, that reduction in agent commissions could cause an exodus of qualified independent agents from the NFIP, which would devastate the program and ultimately hurt consumers.

PIA National is pleased our advocacy against such a cut has—so far—been successful.

That said, this process is not over. PIA National will remain vigilant during the NFIP reauthorization process this year to oppose any attempt to add an amendment to the package that would cut the WYO reimbursement rate.

PIA National will continue to work with Congress to ensure that agents’ voices are heard, and their invaluable work acknowledged, as the reauthorization process continues.

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NATIONAL ASSOCIATION OF PROFESSIONAL INSURANCE AGENTS

Flood Insurance Legislative Position

HOW YOU CAN HELP AGENTS DELIVER FLOOD INSURANCE TO CONSUMERS SUPPORT the House Financial Services Committee-passed NFIP legislative package (H.R. 3167/H.R. 3111), because it: Recognizes the key role that independent agents play in delivering the program to consumers.

Reaffirms the gradual implementation of risk-based rates.

Continues the grandfathering of rates so that properties can be transferred between owners without coverage disruption or surprise.

Increases investments in mapping and mitigation.

Includes the essential continuous coverage provision so that policyholders can move between the private market and the NFIP without penalty.

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OPPOSE attempts to cut or cap agent commissions in NFIP reauthorization.

Insurance agents play a crucial role in explaining this complex program and servicing their clients during the initial sales phase, the renewal period, and in the aftermath of a loss.

Cutting independent agent commissions will lead to an exodus by this vital sales force, which will lead to a decrease in the number of flood policies at a time when increasing the take-up rate for flood insurance should be a universal priority.

PIA National opposes any legislation that cuts the Write-Your-Own (WYO) reimbursement rate.

For more information on this issue contact Gentile, Vice President, Government Relations jonge@pianet.org | 703-518-1365

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Create Cannabis Safe Harbor for Agents PIA National supports a legal safe harbor for independent agents who engage in insurance-related transactions with cannabis businesses that are legal pursuant to state law.

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Create Cannabis Safe Harbor for Agents

More than half the states have legalized marijuana to some degree. Unfortunately, the insurance industry is potentially exposed to civil and criminal liability arising from the differences between the legal treatment of cannabis by federal and state law. To effectively do their jobs, insurance agents need protection from prosecution, with a comprehensive federal safe harbor for agents and insurers that do business with cannabis-related businesses in states where such businesses are legal.

To address this issue, PIA National helped develop the Clarifying Law Around Insurance of Marijuana (CLAIM) Act (H.R. 4074/S. 2201), which was sponsored by Rep. Nydia Velazquez (D-NY) and Senator Bob Menendez (D-NJ) and introduced in 2019. The bill would provide a legal safe harbor for independent agents that engage in insurancerelated transactions associated with cannabis businesses that are legal according to state law.

PIA National’s position respects state insurance laws and protects independent agents from federal criminal prosecution for engaging in legitimate business activities.

In September 2019, key parts of the CLAIM Act were merged with another bill, H.R. 1595, the Secure And Fair Enforcement (SAFE) Banking Act of 2019, which is meant to shield bankers from the same legal jeopardy concerning cannabis. The essential provisions of the CLAIM Act passed the House after they were folded into the SAFE Banking Act. The SAFE Banking Act passed the House in September 2019, and we are encouraging action on this issue in the Senate. Regardless of the exact legislative vehicle, the protection for insurance agents in the CLAIM Act should be included in any legislation considered by the Senate and any final product that passes Congress.

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NATIONAL ASSOCIATION OF PROFESSIONAL INSURANCE AGENTS

Cannabis Safe Harbor Legislative Position HOW YOU CAN HELP PROTECT AGENTS

Support the CLAIM Act (H.R. 4074/S. 2201), which provides a cannabis safe harbor for independent insurance agents.

More than half the states have legalized marijuana to some degree.

The insurance industry is potentially exposed to civil and criminal liability arising from the differences between the legal treatment of cannabis by federal and state law.

To effectively do their jobs, insurance agents need protection from prosecution, with a comprehensive federal safe harbor for agents and insurers that do business with cannabis-related businesses in states in which such businesses are legal.

The House passed a legal safe harbor for independent agents as part of H.R. 1595, the SAFE Banking Act of 2019, on September 25, 2019. PIA National is encouraging the Senate to pass legislation that, like the Housepassed version, includes a legal safe harbor for independent agents.

Regardless of the final legislative vehicle, the protection for insurance agents included in the CLAIM Act should be part of any cannabis safe harbor bill.

For more information on this issue contact Jon Gentile, Vice President, Government Relations 10 | 2020 PIA Advocacy Day jonge@pianet.org | 703-518-1365

Make Tax Relief for Passthrough Entities (S Corporations) Permanent PIA National supports permanent tax relief for independent insurance agencies that organize as passthrough entities, in accordance with the tax reform package passed at the end of 2017.

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Make Tax Relief For Passthrough Entities (S Corporations) Permanent

PIA National played a key role in securing tax relief for passthrough entities in the tax reform package (P.L. 115-141) that was signed into law in December 2017. The tax law provided muchneeded tax relief for agencies, including S corporations, that are organized as passthrough corporations by making available up to a 20 percent tax deduction for qualifying entities.

The 2017 tax reform package created a deduction for households with income from passthrough businesses—including many independent insurance agencies—that are not subject to the corporate income tax. The passthrough deduction allows individuals to exclude up to 20 percent of their passthrough business income from federal income tax. The deduction is subject to several complex conditions, based on the qualification of the passthrough business according to the Internal Revenue Service (IRS), the business owner’s taxable income for the year in question, and whether the business owner intends to file individually or jointly.

Unlike the C-corporation tax cuts included in the 2017 package, the passthrough deduction was not made permanent in the tax law. As a result, the benefit for PIA members with qualified passthroughs will end on December 31, 2025, unless Congress acts.

Make Tax Relief for Passthroughs Permanent The benefits for small business owners, including insurance agencies, who organize as passthrough entities has been clear since the 2017 tax law was enacted. This benefit has eased the pressure of running a small business and has allowed for the owners of insurance agencies to invest in their agencies through hiring and making other improvements to their businesses.

As such, PIA National has begun to lay the groundwork to make the tax deduction permanent.

We strongly support the Main Street Tax Certainty Act (H.R. 216/S. 1149), introduced by Rep. Jason Smith (R-MO) and Senator Steve Daines (R-MT), which would make the 20 percent passthrough deduction permanent.

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NATIONAL ASSOCIATION OF PROFESSIONAL INSURANCE AGENTS

Tax Relief Legislative Position

HOW YOU CAN HELP ENSURE TAX RELIEF FOR OWNERS OF SMALL BUSINESSES

SUPPORT legislation to make the tax deduction for eligible small businesses permanent: the Main Street Tax Certainty Act (H.R. 216/S. 1149), introduced by Rep. Jason Smith (R-MO) and Senator Steve Daines (R-MT).

PIA National supports legislation to make the 20 percent tax deduction for eligible passthrough entities permanent.

Passthrough businesses are businesses whose income “passes through” to their owner’s income tax returns and is paid as if it were individual income tax.

Such businesses, including those of independent insurance agencies, make up most U.S. businesses, according to the Tax Foundation.

Independent insurance agency owners are vital to communities throughout the U.S., and they support their local economies. They need this relief to be permanent so they can continue to invest in their businesses.

For more information on this issue contact Gentile, Vice President, Government Relations jonge@pianet.org | 703-518-1365

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Defend the State Insurance Regulatory System PIA National supports a modern, state-based insurance regulatory system and opposes any federal regulation or international standards that threaten it.

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Defend the State Insurance Regulatory System

PIA National supports our successful state system of insurance regulation. That system has protected consumers and created a competitive and diverse U.S. insurance market for over 150 years.

The insurance industry has in place a supervisory system that allows the individual states, rather than a federal bureaucracy, to regulate it, which helps ensure fairness for policyholders and businesses. This system has prevented major financial disasters; in fact, a report issued by the Government Accountability Office (GAO) in June 2013 found the state-based system of insurance regulation helped to mitigate the negative effect of the 2008 financial crisis on the insurance industry.

Our state-based system of insurance regulation has successfully protected consumers and created a competitive and diverse U.S. insurance market that has thrived for decades.

Repeal the Federal Insurance Office In 2010, advocates of federal insurance regulation succeeded in creating the FIO as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd-Frank). PIA National opposed the creation of the FIO from the outset. The very existence of the FIO threatens the primacy of state regulation of insurance.

There has never been a need to create an office like it, and many of the duties of the FIO are examples of federal overreach and duplication in the context of our system of state insurance regulation. Additionally, like most federal offices, since its creation, its power has expanded. Over the nearly ten years of its existence, the FIO has called for federal regulation of mortgage insurance; for its inclusion, along with state regulators, in international supervisory colleges; and for uniform national standards for state guaranty associations. In addition, it now seeks to administer the National Association of Registered Agents and Brokers (NARAB). Every one of these acts was well outside the FIO’s mandate.

In November 2016, PIA National became the first insurance association to publicly call for the repeal of the FIO. PIA National has since worked with members of Congress to develop legislation to repeal it. To that end, we are pleased to support the Federal Insurance Office Abolishment Act (H.R. 1862/S. 1586) introduced by Rep. Alex Mooney (R-WV) and Senator Ted Cruz (R-TX).  

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NATIONAL ASSOCIATION OF PROFESSIONAL INSURANCE AGENTS

Insurance Regulation Legislative Position HOW YOU CAN HELP DEFEND STATE INSURANCE REGULATION

SUPPORT legislation to repeal the Federal Insurance Office (FIO) (H.R. 1862/S. 1586).

PIA National supports the Federal Insurance Office Abolishment Act of 2019, introduced by Rep. Alex Mooney (R-WV) and Senator Ted Cruz (R-TX).

The existence of the FIO presents an ongoing risk to the system of state insurance regulation. This legislation would remove this existential threat and ensure that the states remain the exclusive regulators of insurance.

This legislation would allow the Department of Treasury to conduct the duties currently handled by the FIO, including management of the terrorism risk insurance program and participation in international covered agreement insurance negotiations. The only difference would be the lack of a bureaucratic, unnecessary federal office.

For more information on this issue contact Jon Gentile, Vice President, Government Relations jonge@pianet.org | 703-518-1365

Protect Crop Insurance PIA National supports the vital role that independent agents play in the delivery of crop insurance.

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Protect Crop Insurance

The federal crop insurance program is a highly technical program that relies on the expertise of independent insurance agents. Crop insurance provides our nation’s farmers with the ability to manage their risk and provide a safe, strong, and dependable food supply.

The agricultural economy has experienced extraordinary volatility lately, and the tumult has taken its toll on farmers throughout the country. Farm debt has increased 55 percent over the last decade, and it now stands at over $400 billion. Crop insurance is often the only protection farmers have from economic disaster.

Opposing Crop Insurance Cuts On February 10, 2020, the administration released its fiscal year 2021 budget request, which included steep cuts to crop insurance.

The budget would cut the U.S. Department of Agriculture by 8 percent, and crop insurance specifically would be cut by $25 billion over the next decade. The proposed cuts would reduce premium subsidies for crop insurance, reduce underwriting gains to insurance companies, and create an Adjusted Gross Income (AGI) limit of $500,000.

The cuts included in the administration’s budget request would compromise the affordability and availability of crop insurance for farmers, seriously undermining the strength of the farm safety net during a time of real struggle for farmers and rural America. Now is not the time to slash the federal crop insurance program, on which so many farmers and ranchers rely to stay afloat.

PIA National has been working with a coalition of organizations that represent every part of the supply chain to express our opposition to attempts to cut the federal crop insurance program.

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NATIONAL ASSOCIATION OF PROFESSIONAL INSURANCE AGENTS

Crop Insurance Legislative Position HOW YOU CAN HELP DEFEND CROP INSURANCE

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OPPOSE cuts to the federal crop insurance program.

With over 300 million acres and 130 different crops protected, crop insurance is a sound investment that helps ensure the production of a stable food, fiber, feed, and fuel supply.

Everyone in the supply chain, from farmers, lenders, and manufacturers to insurance and reinsurance providers and agents, agrees that crop insurance is the centerpiece of agricultural risk management and should not be cut.

During a time of unprecedented volatility for U.S. farmers, now is not the time to cut crop insurance.

For more information on this issue contact Jon Gentile, Vice President, Government Relations jonge@pianet.org | 703-518-1365

Additional Issues of Importance PIA National is always advocating for independent agents on a wide array of issues. While those listed here are not highlighted as top priorities for this year’s Advocacy Day, PIA National continues to address these issues with policymakers.

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Cybersecurity

Additional Issues of Importance

PIA National supports protection of sensitive consumer data using a harm trigger and other methods that are flexible, risk-based, and practical for small businesses.

This year, PIA National is continuing to engage with state legislatures as they consider—and some pass—versions of the Insurance Data Security Model Law, which was passed by the National Association of Insurance Commissioners (NAIC) in October 2017, after years of participation by industry, including PIA National, and consumer representatives. Thus far, Michigan, Ohio, South Carolina, Connecticut, New Hampshire, Mississippi, Delaware, and Alabama have passed similar laws based on the NAIC model. New York also has a similar regulation, on which the NAIC model was largely based.

The NAIC’s Insurance Data Security Model Law requires insurance agencies and other members of the industry to take specific steps to prevent cybersecurity events and outlines requirements that insurance entities, including independent agencies, must take after a breach. PIA National is specifically concerned about agents’ obligations as they pertain to the activities and potential liabilities of thirdparty service providers, the very short timeframe in which to provide notification to the relevant commissioner of a “Cybersecurity Event,” and the number of consumers affected by a Cybersecurity Event to trigger notification to the applicable commissioner, among other issues. PIA National will be pursuing the development of some specific amendments at the state level, depending on the language each state legislature includes in its bill.

PIA National is continuing its outreach to state affiliates, insurance departments, and legislative bodies to prepare them for future legislative sessions that may include the introduction of the NAIC model or something similar.

PIA National is also engaged with Congress on this issue. In the 115th Congress, PIA National opposed H.R. 6743, the Consumer Information Notification Requirement Act (not introduced in the 116th Congress), because it would have imposed improper burdens (written for and intended to apply to banks) on independent insurance agencies, many of which are small businesses serving individual insurance consumers. That bill also would have encroached upon the state insurance regulatory system.

If legislation is to be considered at the federal level, it should set a few parameters and remain sufficiently broad to allow states to fill in the details as appropriate. The very fact that this legislation sought to impose bank-centric standards on independent insurance agencies demonstrates that Congress should not move forward with detailed legislation on this issue, which is one of many better left to states.

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Additional Issues of Importance

National Association of Registered Agents and Brokers (NARAB) The law that reauthorized the terrorism risk insurance program (known as TRIA) in 2015 (the Terrorism Risk Insurance Program Reauthorization Act of 2015) also contained a provision reauthorizing the creation of the National Association of Registered Agents and Brokers (NARAB)—an independent, non-governmental, nonprofit membership organization through which non-resident producer licensing requirements may be adopted and applied on a multi-state basis (PL 114-1, 129 Stat.

3). Once created, NARAB would facilitate agent and broker licensing reciprocity among states without creating a new federal insurance bureaucracy.

NARAB’s implementation requires the identification and Senate confirmation of 13 board members to be named by the White House. Without the creation of its board, NARAB cannot begin operations. In 2020, the implementation of NARAB will again be a priority for PIA National.

Supporting Changes to the Medical Loss Ratio (MLR) Requirement PIA National will continue to support consumer access to qualified health insurance agents and brokers. The Affordable Care Act (ACA) created the Medical Loss Ratio (MLR) requirement, which is designed to limit the percentage of premium that a health insurance company can spend on administrative costs. The MLR requirement is intended to ensure consumers receive at least a minimum value in care for their health insurance premium dollars. However, in the current MLR formula, agent and broker commissions are improperly classified as administrative costs. This misclassification limits consumer access to the essential resources agents and brokers provide. It negatively affects independent insurance agents and consumers, who increasingly lack access to qualified health experts to advise them on their insurance plans.

PIA National helped develop legislation to address this issue, the Access to Independent Health Insurance Advisors Act (not yet introduced in the 116th Congress). The bill makes clear that producer compensation was not meant to be part of the MLR calculation set forth in the ACA. PIA National has also been pursuing a regulatory solution to this issue.

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National

Association of Professional

Insurance Agents 419 North Lee Street Alexandria, Virginia 22314

Telephone: (703) 836-9340 Fax: (703) 836-1279

Government Relations Staff Contacts: Jon Gentile, Vice President, Government Relations jonge@pianet.org Lauren Pachman, Counsel & Director of Regulatory Affairs laurenpa@pianet.org Marc Martinez, Coordinator, Government Relations marcma@pianet.org

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