Advancing the agenda: under ACLI's Keating, life insurers are looking for big changes on Capitol Hill.

Hours before President Bush's 2004 State of the Union speech, Frank Keating, the president and chief executive officer of the American Council of Life Insurers, made his own speech a few blocks away, in front of C-SPAN and a roomful of insurance industry representatives at the National Press Club.

In it, Keating made an interesting pronouncement: The Bush administration again was pushing for tax-free savings accounts, but there wasn't, as yet, any mechanism to encourage people to save in the long term, a crucial factor in America's economic health. Any initiative by Bush or anybody else that failed to properly prioritize long-term savings over short-term savings, Keating said, "isn't good public policy."

As a lifelong Republican and a member of the president's father's administration, Keating could be seen as taking a risk in pre-emptively criticizing Bush's domestic agenda--especially when counting on that president to sign any bill that would be beneficial to the life insurers whose interests Keating represents.

But the life insurance industry, whose chief presence on Capitol Hill is the ACLI, and therefore, Keating, has an ambitious legislative agenda for 2004, and Keating might be the man with the clout to push it through. As a former FBI agent, U.S. Attorney, governor of Oklahoma and member of the first Bush administration, Keating has a long and varied history in public life and has been a well-known presence in Washington for years.

In an interview two days after his televised speech, Keating said the most important item on the ACLI's agenda is federal regulation--the "optional federal charter" approach to regulation that some other insurance trade groups oppose--while continuing to lobby for uniformity in regulation and other improvements in the states.

"We like state regulation, don't get me wrong," Keating said. "But there are regulatory issues that still need to be addressed. Optional federal charter is our No. 1 issue." Federal regulation, proponents say, would allow insurers that sell financial products to better compete with banks and other financial institutions.

Though Republicans control both the White House and Congress, Keating said he is nonetheless making a point of seeking bipartisan support for the industry's agenda. Federal campaign-finance records bear that out. Data covering the latest election cycle show that the ACLI's Political Action Committee has tended to lean more Democratic than overall trends in giving by the insurance industry. Federal Election Commission records covering Jan. 1, 2003, through Dec. 7, 2003, show the ACLI's campaign donations tilted 69% to 31% in favor of Republicans; in the 2002 election cycle, the ACLI's giving was tilted 76% in favor of the GOP.

"PAC giving is only a snapshot," Keating said. "That doesn't make us, and it doesn't make me, any less Republican. It's simply a recognition that there is support for these issues from both parties ... In order for us to accomplish this agenda, we need to have bipartisan support."

A Strong Track Record

Keating already can point to a number of legislative victories since being tapped to head the ACLI last year. The trade group, along with other insurance groups, was key to getting Congress to reauthorize the Fair Credit Reporting Act, making permanent important provisions that pre-empt conflicting state laws and preserve insurers' ability to use credit information. The ACLI also managed to salvage some of the tax benefits enjoyed by companies that buy corporate-owned life insurance policies on their workers; the tax-free benefits, which nearly were killed altogether, were restored by an ACLI-backed compromise measure brought to the Senate in January.

In his State of the Union speech, Bush again pushed for Lifetime Savings Accounts and Retirement Savings Accounts. RSAs essentially would replace traditional individual retirement accounts; income would be taxed before being deposited, but interest would grow tax-free. RSAs would, however, carry substantial penalties for pulling the money out before retirement age. LSAs, on the other hand, would allow people to save as much as $5,000 a year tax free and to take the money out at any time.

"LSAs are the third rail," Keating said.

Tax incentives for long-term savings would be a major coup for life insurers selling annuities. Twice during his speech at the National Press Club, Keating pointed out that the life insurers the ACLI represents collectively form the fourth-largest group of investors, in terms of dollars, in America's long-term debt. Keating stopped just short of calling for mandatory retirement savings, as is the case in Australia, Chile and a host of other countries.

"Long-term savings are an essential source of capital for continued economic growth," Keating said. "Anything we can do to encourage that is sound tax policy."

The ACLI also is continuing to seek above-the-line tax deductions on long-term-care premiums, Keating said.

When compared with property/ casualty insurers, the life insurance industry tends to get short shrift when Congress is passing legislation, perhaps because of a perception, unfair or not, that it caters to rich people looking for tax shelters. But life insurers, Keating said, don't suffer from that perception in Washington.

"The life insurance industry doesn't really have a negative image. On Capitol Hill, it has no image," Keating said. "We're not an Enron, we're not a mutual-fund scandal. We're a 'white hat' industry that's been doing an extraordinary amount of good for the American people for the past 150 years."

Life insurers' legislative successes:

* Sales of corporate-owned life insurance policies, which generate about $8 billion in premiums annually, came to a virtual halt in September 2003 when the Senate Finance Committee sought to close off the tax advantages. Life insurers' lobbying efforts resulted in a compromise bill that preserved some of those benefits.

* The American Council of Life Insurers and other insurer trade groups successfully lobbied Congress to make permanent Fair Credit Reporting Act provisions that exempted them from cumbersome state rules and that also preserved their ability to use credit information.

Still on the agenda:

* Above-the-line tax deductibility for long-term-care insurance premiums.

* Tax incentives that favor annuities and other forms of long-term savings, rather than short-term, tax-free savings accounts.

* Optional federal regulation of the insurance industry, to better let life insurers compete with banks.

* Getting earnings from life insurance products taxed at a capital-gains rate, rather than the higher income-tax rate.

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Leading Recipients

Leading congressional recipients of campaign contributions from ACLI PAC, the political action committee of the American Council of Life Insurers, for the 2004 election cycle (Jan. 1-Dec. 7, 2003).

Member                Chamber    Amount

Richard C. Shelby,
  Republican-Ala.     Senate     $7,000
Judd Gregg,
  Republican-N.H.     Senate      6,000
Nancy L. Johnson,
  Republican-Conn.    House       5,000
Robert Menendez,
  Democrat-N.J.       House       5,000
Roy Blunt,
Republican-Mo.        House       5,000
Richard Baker,
  Republican-La.      House       5,000
Chuck Grassley,
  Republican-Iowa     Senate      5,000
Earl Pomeroy,
  Democrat-N.D.       House       5,000
Tim Johnson,
  Democrat-S.D.       Senate      5,000
Jim Bunning,
  Republican-Ky.      Senate      5,000

Source: Federal Election Commission

Leading Contributors

Congressional campaign contributions from ACLI PAC, by party and chamber, for the 2004 election cycle through Dec. 7, 2003.

Leading Contributors

Party         Chamber    Amount

Republican     House     $65,608
Republican    Senate      40,160
Democrat       House      36,328
Democrat      Senate      27,999

Source: Federal Election Commission