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The question of protection versus investment was becoming a crucial issue at this time. In March 1988 the NALU and the Association for Advanced Life Underwriting released a legislative proposal that would significantly limit the amount of cash a policyholder could pay into a single premium whole life policy during the policy's first five years. It was drafted as an alternative to the proposed and much-debated bill before Congress, known as H.R. 3441, which would tax all life insurance policy distributions. Explaining the agents' motives, NALU counsel Danea Kehoe noted:

There is a widespread perception on Capitol Hill that large amounts (some $15 billion over the last four years) of single premium life insurance are being sold primarily as a tax shelter. There is a much smaller number of people in Congress who are questioning the long-standing tax rules governing loans against—and withdrawals from—all life insurance policies.

NALU believes that current law governing life insurance pollicies is entirely appropriate for regular life insurance policies, but that there is a legitimate concern about life insurance policies, but that there is a legitimate concern about life insurance policies designed and being marketed as a tax shelter. Thus, debate on how to eliminate this unintended use of life insurance is necessary and NALU is a willing participant. However, NALU has no doubt that life insurance is taxed as it should be and any new tax rules should apply only to the kinds of policies that act as tax-sheltered investments. NALU will vigorously oppose any proposal that premises its provisions on an assumption that policy loans, withdrawals and/or dividends should be taxed more harshly than usual income tax principles would dictate (i.e. current law).

NALU is convinced that the appeal of the product to those purchasing it primarily as an investment will be substantially eliminated by requiring that substantially more insurance be purchased per premium dollar.[xxxvi]

On March 6, 1988, congressman Dan Rostenkowski of Illinois, chairman of the powerful House Ways and Means Committee, chided the members of the Association for Advanced Life Underwriting, "In 1984, I thought we placed reasonable restrictions on investment-oriented life insurance products. But the enormous growth of single premium policies has called into question the adequacy of the 1984 act. This is a serious issue for the Ways and Means Committee," he emphasized. "We support the favorable tax treatment of life insurance however we will not sit by and allow the law to be abused."

In an effort to reinforce the agents' position, NALU Federal Law and Legislation Committee chairman William V. Irons and NALU Product Tax Task Force member William V. Reagan, III, testified on March 15 before the House Ways and Means Committee's Subcommittee on Select Revenue Measures on the investment uses of life insurance. "We completely oppose H.R. 3441. It would deal a body blow to permanent life insurance while making only a negligible dent in single premium sales," Irons declared.

Discussing these lobbying efforts in an editorial in the June issue of Life Association News, NALU secretary Robert J. Wernecke explained that the NALU's strategy had been to concede there was a problem and develop a solution that allowed Congress to stop perceived abuses while retaining current tax arrangements for the majority of life insurance products. "It's not in anybody's best interest to cloak a tax-advantaged investment supported by a minimal amount of death benefit in the mantle of righteousness," he argued. "If NALU fought for a product Congress has already decided to tax, we could find ourselves in the same sad fix as the real-estate lobby—-without credibility," Wernecke concluded. "You and your business are just too important for us to put at risk."

For the sixth year in a row membership in local associations rose in1988 to a total of 137,524. The NALU held its annual convention that year in Dallas. Alan Press, general agent for Guardian Life in New York City, became president of the national organization for the 1988-89 Association year. Press had joined Guardian Life in 1956 immediately after graduating from Columbia College, and was appointed general agent in 1964. His agency was always in the top five of his company's 100-plus agencies. A past president of the New York City Life Underwriters Association and the New York State Life Underwriters Association, he had testified before Congressional committees regarding the taxation of life insurance, the tax treatment of employee benefits plans, and the deregulation of financial services. He was a frequent contributor to Life Association News and other industry publications. The NALU had distributed more than 500,000 copies of a collection of his anti-replacement articles. These articles about A.L. Williams were the basis of the NALU video, "Rhetoric vs. Reality."

That September the NALU announced that a second videotape outlining the replacement techniques of the A.L. Williams organization was ready for distribution. Entitled, "What've You got To Lose?" the fifteen minute videotape and accompanying booklet, which sold for $25. Like its predecessor, it was well received by the field force and attracted the favorable notice of industry observers.

By the beginning of 1989 Press could report to the locals associations that the controversial issue of how to tax single premium life and other investment-oriented insurance products was finally resolved. "The Technical Corrections Act of 1988," he explained, "created a new category of life insurance called 'modified endowments,' which generally are contracts with fewer than seven level annual premiums. Modified endowments are subject to more stringent tax rules than traditional whole life insurance." Noting that this change in the tax code effectively closed down single premium life as a tax shelter, but spared other permanent life insurance products from adverse tax treatment, Press reminded the agents that NALU had worked closely with Congress to see that traditional forms of insurance weren't jeopardized and the new rules would be fair and workable.

The hiring of David E. Hebert, former legislative director for Congressman Jack Buechner of Missouri, in January 1989, gave the NALU a total of nine lawyers. An attorney with experience in health, tax, commerce, and banking issues, Hebert began serving as counsel for NALU on health insurance and benefits. In announcing his employment, Bobo noted that Hebert's addition to the staff "comes at a time when we expect renewed activity in Congress on health care and employee benefits legislation." With Mr. Herbert on board, NALU "will be well positioned to represent the concerns of insurance agents and policyholders on such controversial issues as mandatory health care benefits, long-term care, pension reform, and taxation of employee benefits," Bobo said.

At the same time, Bobo named NALU counsel Roland L. Panneton vice president of marketing and membership services. "In his new capacity," Bobo said, "Ron will oversee field services, awards and membership departments, as well as the overall marketing of NALU's products and services. Ultimately, this will help NALU be more responsive to the needs of insurance agents by providing them with more programs and services to better serve their clients."

Perceiving a need for agent education in specific areas, the NALU during 1988 and 1989 continued developing and promoting the "Pro Series," a group of mini-courses begun the year before with a seminar on selling group insurance. Course outlines and instructional materials were designed to be offered by local associations. Besides "Dynamics of Group Insurance," there was another course titled "AIDS Strikes Home: You, Your Company, Your Career." In October 1988 Life Association News announced another addition to the series:

The National Association of Life Underwriters is offering a new four-hour seminar on "The Agent as Entrepreneur" beginning this month.

Written by the Life Underwriter Training Council (LUTC), the seminar was developed to help agents focus on their career development and to provide concepts, strategies, and tools to assist them in increasing their profitability.

Some of the topic areas include goal planning and implementation, personal income and financial management, support staff, office automation, office procedures, time control, professional image, public relations and advertising, professional practice continuation, business relationships, professional development, and continuing education.[xxxvii]

With an operating budget of about $11 million, the NALU had one hundred and eight employees at its Washington headquarters at this time. Continued extension of services, expanding programs and enlarged staff created pressure for more space. Several years before the District of Columbia Life Underwriters Association had removed its headquarters form 1922 F Street to larger quarters in another part of the city. In 1989 the Life Underwriter Training Council announced a fund-raising drive to purchase its own headquarters. The organization's lease would be up on December 31, 1989. Since the LUTC occupied the entire top floor of the NALU headquarters building Bobo and his staff could anticipate the luxury of greatly expanded quarters.

Foreword by Alan Press, 1988-1989 NALU President

Preface by Jack E. Bobo, 1989 NALU Executive Vice President

Introduction

Acknowledgements

Chapter 1

Laying the Foundation—A Meeting at the Parker House

Leading Figures—Ransom, Carpenter, Blodgett and Plummer

Conditions Leading to the Foundation of the NALU

Rise of Modern Life Insurance and the General Agency System

Issues and Accomplishments of the First 15 Years

Chapter 2

In the Wake of the Armstrong Investigation