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NALC
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MEMORANDUM IN OPPOSITIONTo Proposed Legislation in the State of New YorkA. 7739 (Pheffer)/S. 3985 (Velella) The National Alliance of Life Companies (NALC) is a national trade association of more than 250 life and health insurance companies. The NALC includes a number of New York domestic insurance companies and numerous other companies that do business in New York. Therefore, the NALC has substantial interest in the above captioned bill. This bill would amend the general business law, the public health law and insurance law to prohibit the payment of commission or other consideration to a funeral director or an employee of a funeral home for the purposes of inducing such persons to sell an insurance contract to fund a funeral or burial expenses upon the death of the insured (Preneed insurance). In order to sell this coverage, the funeral director must be a licensed life insurance agent. The prohibition of payment of commissions or other consideration to these licensed insurance agents would effectively eliminate the sale of this vital insurance product. The New York State Funeral Directors Association (NYSFDA) supports this legislation. In addition, the NYSFDA opposes the sale of Preneed insurance to consumers in New York. The NYSFDA administers a trust used to fund funeral expenses. In addition, the NYSFDA receives fees well in excess of $1 million annually for administration of the trust. The sale of preneed insurance to consumers is very popular throughout the United States and other countries. Preneed products provide consumers with the opportunity to select funeral related goods and services in advance of their death. When the consumer funds the funeral in advance, the funeral home guarantees the price of that funeral from that point forward. The process allows consumers to shift the risk of inflation to the funeral home. The sale of this insurance product provides additional funding options for those consumers. For example, unlike funeral trust accounts, Preneed insurance is not subject to Federal income tax on consumers. Receiving compensation for the sale of this product, just as the sale of any other product in connection with a funeral, serves to help the consumer. In addition, licensure is required in all states, for those who explain the prefunding options and enroll consumers interested in preplanning a funeral. Compensation for this service, just as the sale of any other service to a consumer in connection with a funeral is not morally or ethically wrong. We see no compelling reason to limit consumer options. Preneed insurance is an acceptable form of coverage in all states with the exception of Wyoming. It is used by hundreds of thousands of consumers who choose to pay for their funerals in advance. This type of niche product serves a useful purpose to provide consumers with a tax-advantaged option for payment of a funeral. In addition, unlike a trust agreement, the full face value of the insurance policy is often available to pay expenses the moment the product is issued, even if only one premium payment is paid. Trust agreements will only pay the amount of money accumulated in the trust at the time of need. In addition, by contract, any amount of insurance coverage in excess of the guaranteed price of the funeral must be paid to the beneficiaries. In a trust situation, there is no requirement that any funds in excess of the cost of the funeral be returned to the beneficiary. While preneed insurance coverage is a relatively new funding mechanism for funerals in New York, it has become predominant throughout the industry in United States. The popularity of this product is a result of the practical and affordable means provided for the funding of funerals. We urge that this legislation, which is in anti-competitive and anti-consumer not be acted upon favorably. Should you have any questions, please contact the National Alliance of Life Companies at 800-233-6189. The National Alliance of Life Companies is a national trade association within 250 life insurance companies, which do business throughout the United States. * * * * * * *The National Alliance of Life Companies (NALC) is a national trade association of stock and mutual life and health insurance companies. The NALC provides member companies with timely and accurate information useful in the day-to-day conduct of business, and is dedicated to providing a forum in which member companies can work with regulators and legislators to promote fair and effective regulation of the life and health insurance industry, while allowing for a reasonable return to policyholders and shareholders. The NALC was formed in 1992, immediately after the merger of the National Association of Life Companies with the American Council of Life Insurers (ACLI). The NALC is primarily composed of small and medium sized insurers. When the merger occurred, a number of smaller companies decided that the life insurance industry could not be adequately represented by one voice. Therefore, those members decided to form the current NALC.
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Copyright © 2003-2008, National Alliance
of Life Companies
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The NALC held its 2008
Spring Conference April 2-5, at the Grand Hotel Marriott, Point
Clear, Alabama.