NAIFA Reaffirms Support For State Regulatorion, Despite Its Flaws

Although the policy was approved by most of the states where Starmount is admitted, two states did not approve it, he says. After three years, Sternberg says, Starmount had to abandon the program because it was not economical to promote it to only part of its customer base.

Starmount, he says, runs newspaper ads. But one state fined the company $10,000 because the ad violated a unique rule, Sternberg says. That rule says that if a company shows even one rate in an ad, it must show all rates, he says, which would have meant 188 rates.

"We obviously no longer run ads in that state, but such foolishness is solely political protection for entrenched marketers, who oppose competition," Sternberg says.

He says Starmount has insurance products that have been filed for 2.5 years, but are still not approved in every state.

"The excessive delay is expensive and frustrating," he says. "In the end, the consumer has less choice."

The present system, Sternberg says, will always handicap Starmounts efficiency. "We are forced to charge the consumer more, as well as to fall short of our sales potential, because of unnecessary and inconsistent regulations," he said.

Finally, NAIFA is urging Congress to carefully consider the implications of a delicate issue–the collateral source rule–that emerged in the aftermath of the Sept. 11 terrorist attack.

The legislation providing compensation to the families of the victims of the attack contains a provision calling for the compensation to be reduced by any amounts received from a collateral source, such as life insurance or pension benefits.

Now, NAIFA notes in a letter to Capitol Hill leaders, a similar provision appears in H.R. 3375, a bill intended to provide compensation to the families of victims of the embassy bombings in Kenya and Tanzania.

NAIFA says this collateral source provision amounts to picking winners and losers in the midst of terrible suffering.

"Victims of the Sept. 11^th attacks and their families should not have been penalized because they had the foresight to purchase financial protection against injury and death," NAIFA says. "Rather than punish working Americans who prudently purchased life insurance to protect their families, good public policy dictates that individual initiative be rewarded."

Now that the collateral source provision also appears in H.R. 3375, NAIFA says, some may draw the conclusion that the federal government will guarantee compensation to victims after any national tragedy.

If so, NAIFA says, individuals will be discouraged from taking responsibility for their own financial security.

Individuals who had the prudence to obtain life insurance, annuity or pension benefits should not be treated unfairly, NAIFA says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, June 24, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.