To The Point
Political action by committee
Industry PACs help keep insurance issues top of mind with legislators
By Emanuel Levy
Efforts to influence the enactment of legislation or the adoption and enforcement of government regulation by government bodies has been part of the American scene almost since the beginning of the republic. How that is achieved takes a variety of forms but in essence, it calls for the ability to gain access to those who legislate or those who regulate. There are the indirect methods of letters and other communications to members of Congress, state legislators or their regulatory agencies, or other forms of communications such as newspaper articles, letters to the editor or studies.
Face-to-face contacts by individuals with legislators has a long history, some of it unsavory, but the right to express views about how government is conducted is constitutionally protected. Thus, lobbying has deep roots. According to Wikipedia, the Internet encyclopedia, the origin of the term “lobbyist” is attributed to individuals who attempted to influence Ulysses S. Grant by getting his ear while he sat in the lobby of Washington D.C.’s Willard Hotel.
According to sources, Grant often sat in the hotel lobby to enjoy his cigars and brandy because his wife objected to smoking in their living quarters. Those seeking governmental favors considered it a good moment to get his attention. But there is also reference to lobbying that appeared as early as 1820 in a newspaper in New Hampshire, describing efforts by members of the Senate to twist the arms of some House members.
Another historical reference to the lobbyist comes from The Princeton Review, which claims that the term derives from the locations where early practitioners of the art of political pandering sought out legislators or other government types. They hung around lobbies or anterooms of political buildings. The Princeton Review reports that James Madison issued a warning that bribery was a constant threat lurking in the activity of lobbying. But the Review also observes that despite its shortcomings, “lobbying cannot be legislated out of existence though, as it is protected by the Constitution.”
One of the shortcomings of the lobby system, not counting Political Action Committees (PACs), is that too many legislators are not averse to selling their votes to the highest bidder. During the past few years it became clear that an awful lot of money and other favors are being exchanged. Despite all the mechanisms in place to curtail the sale of votes by legislators, particularly in Congress, the beat will go on.
But let’s turn to the PACs, where the system appears to avoid the excesses of K Street (the Washington, D.C. street where many lobby offices and think tanks are located). In contrast to the K Street lobbyists who are individually secured by corporate bodies or organizations on a retainer basis, PACs are financed by membership contributions through single-interest groups, such as insurance associations, that traditionally use highly motivated staff as contacts with legislators or regulators. PACs seek contributions from association members for the benefit of the political parties. It’s interesting to note that in the current campaign cycle, the PAC contributions of insurance companies and associations are almost evenly divided between Democrats and Republicans.
According to the Britannica Concise Encyclopedia, the PAC concept was created at the end of World War II, when the labor organization, the Congress of Industrial Organizations (CIO), set up a division to collect funds from members, which would be used for political purposes. That became a prudent way of continuing efforts to influence legislators after Congress had enacted legislation barring use of labor union assets to seek political advantages.
That legislation was limited to labor unions, but it was expanded in 1971 under FECA, the Federal Election Campaign Act, allowing corporations to contribute politically directed funds through their own PACs, and that act was further expanded in 1974 and 1976 to include trade associations. The concept grew exponentially and by 1988 there were 4,000 such organizations.
The insurance industry came on the scene early. For example, the then Independent Insurance Agents of America (now the Independent Insurance Agents & Brokers of America [IIABA]), formed InsurPac in 1975. It is currently one of the top 25 PACs in Washington, D.C.
In a recent statement Charles Symington, the IIABA’s senior vice president of government affairs and federal relations, said that 24,000 members of the association contribute to the PAC operation. He added, in an appeal for more funds, that individual members can make an average contribution of $200 so that the cumulative total gives the PAC “a collective voice that is much louder than that of the individual.” He added that it is “impossible to undervalue the power of a collective voice” speaking on behalf of independent agents.
Symington said that the contributions “do not buy solutions to legislative debates,” but that they do allow the opportunity to educate members of Congress and “develop working relations with them.” He also said that the relationships make it much easier to “get a foot in the door when critical legislation is being decided.” For example, he listed current legislation pertaining to the controversial subjects of federal regulation of insurance, producer compensation, tort reform and tax issues. He could have added more.
The National Association of Professional Insurance Agents (PIA National) also emphasized the significance of personal contacts with legislators in its recent announcement of an advocacy program. It asserted: “The more PIA members get to know and speak with their elected officials, and become part of the political process, the better agents will fare in legislation that could have dramatic consequences on their business and their lives.”
There is little question on the subject, but to get elected or re-elected to public office is a costly enterprise. Members of the House of Representatives or state legislative bodies have to stand for elections at a pace that almost defies description. Members of the House are regularly financially challenged to retain their seats while others seek to unseat current members. The cost is often prohibitively high and fund raising is a daily dilemma.
So when PACs bring in millions of dollars, which the Republican or Democratic parties can spread around to candidates—without their having to establish phone banks or otherwise beg from and cajole “sympathetic” friends, relatives, constituents or “pay back” sources—they are grateful. They are better served when all they are asked to do is confer with representatives of the PAC entities, which is part of their responsibilities in any event, and a valuable learning process on legislation as well. It’s a modest payback but it emphasizes the importance of individual contributions to PACs.
Symington once observed, “Lobbying and a well-funded PAC go hand-in-hand.” Touting IIABA’s InsurPac, he said its voice “resonates through the halls of Congress.” He added, “Every elected official knows that a contribution from InsurePac is a contribution from 24,000 small business owners.” Actually, office seekers at all levels know the impact of every PAC created by the brokers and agents and the insurers.
The significance of the PAC has also been emphasized on the company side. For example, Lee Ellis, the former chairman of the PAC for the Property Casualty Insurers Association of America (PCI), said recently that the PCI PAC “utilizes the personal voluntary contributions from PCI member companies’ employees to help elect officials who share our free market, pro-business agenda.” He said that through the PAC, “we can help elect a Congress that understands and supports our interests.” Ellis reported that PCI employees contributed $456,598 to 221 state and federal candidates in 2006.
Answering a self-imposed question as to why there should be contributions to its PAC, the National Association of Mutual Insurance Companies (NAMIC) declared that the reality is that politics impact every facet of our lives—especially in the insurance industry. NAMIC adds: “Insurance companies can either choose to gain control of our political situation or live with the results. The PAC will give you and your organization the opportunity to be more effective in the political arena by pooling together individual employee contributions with those of other member companies and legitimately and effectively contributing to the campaigns of candidates running for public office who support legislation that is important to NAMIC and is consistent with our mission and our goals to promote a financially sound, competitive and private insurance market.”
And, according to the American Insurance Association, “A key goal in grass roots advocacy is to develop a long-term relationship with your legislator. A personal meeting while your legislator is at home in the district is the best way to build that relationship and communicate your views on an issue.”
The life insurance and health insurance segments are also imbued with the importance of PACs. A major example is the National Association of Insurance and Financial Advisors (NAIFA), which ranked among the top 1% of all 3,700 PACs registered with the Federal Election Commission in 2005, according to NAIFA. In a recent election, the National Association of Insurance and Financial Advisors PAC and its 50-state affiliates contributed approximately $3 million to federal and state candidates.
The author
Emanuel Levy, editor of Insurance Advocate from 1958 to 2004, joined the weekly insurance news magazine in 1946 after serving with the United States Army. He has appeared as a speaker at meetings and seminars across the country, and is the recipient of many awards and citations. He served on the faculty of the College of Insurance for the annual orientation course for incoming insurance regulators and staff members, lecturing on the debate over state and federal regulation of the insurance business. He wrote insurance articles for The Economist magazine, and for many years was insurance section editor of the World Book Encyclopedia’s annual historical review book.