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The Year Ahead: 2018 Will be a Pivotal Year for the Alliance and the Fraternal Movement

January 8, 2018
2017 is behind us. By any standard, the year was a success for the Alliance and its members. In the congressional arena, the Alliance kept the fraternal tax exemption off the table during the most significant tax reform debate in 30 years. At the NAIC, the Alliance secured an exemption from PBR requirements for small insurers that would have imposed expensive and unnecessary regulatory requirements on small life insurers, including many fraternals. Representatives from virtually every member society participated in at least one of our conferences and webinars, and rated the quality of these programs higher than ever before. The Alliance continued to provide members with timely and important information on everything from newly-enacted regulation to corporate governance through our bulletins; in-person presentations at member society conventions, board meetings and state fraternal alliance events; and online social networks. And the Alliance delivered comprehensive branding research and materials to its members that trade groups ten-times our size wouldn’t have dreamed of offering. 2018 imposes an entirely new set of challenges for the Alliance and its members. In addition to running the organization as we have in the past – conducting all the familiar advocacy initiatives, educational programs, and information services – we will be transitioning to a new operating model effective January 1, 2019. Over the past nine months, the Alliance Board and I have provided members with a great deal of information on the reasons for this move, and have asked you for feedback on various aspects of the changes being considered. The bottom line is that flat revenues attributable to a slowly declining membership and increasing expenses for salaries, benefits, office space, consultants, and virtually every other factor needed to run the organization mean that the status quo is no longer a viable option. After months of carefully considering all alternatives, the Board decided to strategically restructure the organization to allow the Alliance to focus its resources on those activities that are most important to members and that no other industry trade group can provide. State and federal advocacy clearly top that list, based on the results of the past decade of membership satisfaction surveys, followed closely by networking opportunities, education programs, and information services. As a CEO whose primary responsibility is carefully analyzing what the future might hold for fraternals and the Alliance and recommending ways to address these challenges, I pushed the Board to consider options for dealing with a rapidly changing environment. None of us knew where such an effort would end up, but all were quite certain that significant changes would likely be required. The decision to reorganize the Alliance was not one taken lightly by me or the Board. The ramifications of this decision affect the lives of many people – not the least of which are a small but dedicated group of staff members whose careers with the Alliance will likely come to an end by the end of 2018. But the Board and I were determined to do what was in the best interests of the membership and the fraternal movement. In the end, that is what drove our actions. This Bulletin will provide more details about the Alliance’s 2018 Strategic Goals, how our operations will be affected by the move to the new operating model, and what you can expect from us in 2018 and beyond. As I approach my 10th year as the CEO of the Alliance, I am more confident than ever that the decision to restructure the organization was the right one for the sustainability of the Alliance and the fraternal movement. I am more excited than ever to lead the organization on this journey, and absolutely certain that we will be able to emerge as a stronger, more effective, and more sustainable trade association over the long term.

Advocacy and Policy

Federal tax reform remains our highest advocacy and policy priority. Despite the enactment in December 2017 of sweeping tax reform that preserved the fraternal exemption, the effort to revamp the Tax Code is far from over. The tax reform bill signed by President Trump increases the federal deficit by at least $1 trillion. That will almost certainly trigger efforts to trim spending and find other so-called “pay fors” by GOP deficit hawks in the coming legislative session. While no direct threats on the fraternal exemption have been proposed, the Alliance will be closely watching activities and continuing to strengthen our relationships with members of both the House Ways and Means Committee and Senate Finance Committee. We’ll be calling on member society CEOs to help us with these efforts throughout the year. Here is a look at some of the key federal advocacy initiatives we are planning for 2018: Fraternal Executive “Day on the Hill” The Alliance’s Executive Summit will be held in Washington, DC, from April 23-25. Meetings between fraternal executives and Members of Congress will be an integral part of this event. We encourage every Alliance member CEO and COO to register for this invitation-only conference and the Capitol Hill meetings to demonstrate the incredible value that fraternals deliver to individuals and communities from coast-to-coast. House and Senate Resolution Co-Sponsor Recruitment – One of the major objectives of the congressional visits that will be scheduled in conjunction with the Executive Summit is the recruitment of co-sponsors for the House and Senate versions of our “Fraternal Resolution.” We suspended recruitment efforts in the fourth quarter of 2017 while Congress debated the tax reform proposal. Now that this law has been enacted, we will resume our efforts to secure as many co-sponsors as possible before the 2018 session comes to a close. Local Chapter Leader Grassroots Event – Once again, local chapter leaders from several Alliance members will travel to Washington, DC, from March 6-8 to participate in a Thrivent-sponsored grassroots advocacy event. Delegations of member society representatives and leaders from Thrivent, the Alliance, and our respective advocacy firms will spend two days meeting with targeted Members of Congress to tell them about the power of fraternalism in their own districts. No doubt this effort will result in the recruitment of additional co-sponsors for our Resolutions and raise awareness of the fraternal model on Capitol Hill. Individual CEO Meetings with Key Lawmakers – In the second half of 2018 the Alliance will focus on scheduling meetings for individual member society CEOs with congressional leadership and key members of important congressional committees. This “grasstops” type of advocacy initiative allows the Alliance to target specific members of Congress and showcases the communications skills of our CEOs. Please contact me if you are interested in participating in this program. Creation of a Fraternal Caucus – For the past six years, the Alliance has focused significant effort on successfully recruiting co-sponsors for our Congressional Resolutions. In 2018, we’ll study the feasibility of turning this reliable network of legislative supporters into something more permanent: a Congressional Fraternal Caucus. Right now, the idea is in its infancy, but we think it has merit and will allow us to communicate more effectively with those Members of Congress who have demonstrated their support for fraternals over the years. Stay tuned for updates on this new initiative. Creation of a PAC – Also new in 2018, the Alliance Board will be studying the feasibility of creating a Political Action Committee (PAC) to raise funds from member society executives and contribute them to those Members of Congress who support the fraternal model (who are very likely to be members of the Fraternal Caucus). PACs are an important advocacy tool for virtually every trade group working on issues in Washington, DC. If the Alliance is truly going to be an organization that effectively influences the outcome of debates on issues that affect its members, we have to be able to demonstrate our support for those Members of Congress who consistently support us. Look for surveys asking for your views on the creation of a PAC in the coming months. State Advocacy initiatives focus on the enactment of modest reforms to existing fraternal solvency, receivership, and liquidation regulations in five key states: WI, MN, IL, OH, and TX. The proposed reforms extend the Alliance-sponsored legislation enacted in Illinois in 2016 to better protect fraternal members from potential assessments related to insolvencies and the expenses associated with often protracted receivership and liquidation proceedings. The ultimate goal is to create a fraternal regulatory system that continues to exclude fraternals from participation in state guaranty associations but protects fraternal members as well as the commercial guaranty fund system. The Alliance has already initiated outreach to insurance department officials in each of the five targeted states and has received very positive responses from regulators. We will work with domiciled members in these states to introduce and advocate for enactment of the measure and keep all members apprised of our progress as developments occur. This is one of the most significant proactive advocacy initiatives undertaken by the Alliance since the effort to adopt a Model Fraternal Code more than 30 years ago and could result in improvements to the fraternal regulatory system that allow us to more effectively promote not only the safety of the business model but the value of membership to those most receptive to it. At the NAIC level, the Alliance will be working closely with our colleagues from the commercial insurance sector on a wide variety of regulatory issues that impact all insurers but may have a specific or disparate impact on fraternals. These include proposed changes to bond rating factors that could significantly reduce insurer’s RBC ratios; changes to VM-20/22 tables that could result in a PBR requirement for annuities; annuity suitability requirements that could create liability exposures for societies and their field representatives; changes to fraternal blanks requirements; and enactment of new model acts on cybersecurity, corporate governance, and long-term care guaranty funds. Taken as a whole, the potential ramifications of developments at the NAIC and individual states could have a far more significant impact on fraternals than federal tax issues. That is why the Alliance is making extensive efforts to build and participate in reliable industry-wide coalitions that enhance our ability to impact the outcome of these debates and strengthen our own ability to ensure that our individual voice is heard on fraternal-specific issues. And in Canada, the leadership of the Alliance’s Canadian-domiciled members will be meeting in early 2018 to determine how Canadian societies can best address their advocacy needs. Canada’s federal regulator – OSFI – has tightened the regulatory reins on smaller insurers, making it more difficult for some fraternals to survive. In addition, Canadian fraternals do not enjoy the extensive tax exemption that their U.S. counterparts do, which opens the door for these organizations to work more closely with Canada’s commercial insurance company trade group. Nonetheless, Canadian fraternals are distinctly different than their commercial colleagues and will still require education and information services designed especially for fraternals.


The Alliance will conduct three major conferences in 2018: the Executive Summit (April 23-25 in Washington, DC); the Spring Symposium (May 22-24 in Chicago); and the Annual Meeting (September 5-7 in Minneapolis). We hope to make each of these meetings “Provocatively Productive.” That is to say, some of the speakers may be a little edgy, and some of the topics may make you a little uncomfortable. There are plenty of other industry meetings that you can attend and hear the same things you’ve been hearing for the past 30 years. We’re going to do our best to be different. To poke holes in the status quo. To make sure you don’t walk out of one of our sessions thinking “this was just another 45 minutes of blah, blah, blah.” Our goal is to spark a new idea that results in Alliance members forging new relationships with non-traditional partners, to expand their community outreach efforts to serve entirely new communities, and to enhance their marketing programs to attract new members and GROW! This month the Alliance will conduct a series of webinars for those members who purchased the branding campaign research and support materials to help those societies maximize the value of these powerful messages and visuals in advertising programs, social media outreach, web sites, and agent marketing efforts. The completion of the branding materials was an unprecedented accomplishment for a trade association of our size, and we want to do everything we can to give members the tips and tools they need to put this program to work in their individual branding initiatives. Our other primary objective is to determine exactly what our 2019 conferences will look like. As you know, we will be reducing the number of in-person meetings we sponsor from three to two next year. The traditional Annual Meeting will no longer be held. Instead, the annual business meeting will be conducted at the Executive Summit (which will likely be held in the fall instead of the spring), and the Spring Symposium will be modified to ensure that we offer education programs on fraternal-specific topics that are difficult, if not impossible, to find elsewhere. Look for a variety of surveys and questionnaires in 2018 on education issues as we seek to create meetings that produce results, add value, and are not offered by any other trade group.


During 2018, you will see the Alliance begin the transition to a more streamlined way to provide members with more effective and efficient access to information. We will revamp and taxonomize all the information on our website so that members can more easily locate the items they are looking for, whether it’s the latest information on NAIC Model Acts, background data on corporate governance, or results of fraternal compensation studies. We’ll also be looking at developing an all-new legislative/regulatory/compliance information service where members can receive bulletins on regulatory and legislative enactments and compliance tips in the states in which they do business, or search for this data on the Alliance website. We plan to bulk up our electronic grassroots advocacy capabilities in 2019 using software that will allow individuals from member societies to identify their state and federal legislators and send them emails on issues important to the fraternal community. And we’ll be enhancing our existing online communities – and creating a new Small Society Forum – to make it easier for members to share ideas and information with one another and the Alliance staff and leadership.

The New Alliance Operating Model

In December 2017, the Alliance Board accepted the recommendation of the Joint Executive and Finance Committees to implement an operating model that relies on a greatly reduced staff (likely consisting of two full-time professionals) supported by the services of an Association Management Company (AMC) to handle virtually all of the administrative and backroom functions of the organization. This new operating model is scheduled to begin on January 1, 2019. We are making every effort to keep the Alliance staff in place through the end of 2018, although we know it is likely that some staff members will seek other professional opportunities before then. I will remain as the CEO of organization through 2018 and will continue to serve in this capacity after that date at the will of the Board. My primary responsibility, in addition to managing the transition to the new operating model, will be oversight of all Alliance advocacy programs at the state and federal level. I’ll also be responsible for member relations and communications. That means making myself available to address member society conventions, board meetings, state fraternal alliance meetings, and other gatherings on topics from advocacy to corporate governance to trends in the fraternal sector and the life insurance industry. Finally, I will be responsible for identifying qualified candidates to succeed me as CEO when the time comes to ensure the organization has a steady hand on the tiller. Additional Alliance staff and the selected AMC will handle all networking, education, information, member benefits, and operational duties. The AMC will be the “silent partner” in the organization. Think of it as a shared services provider for trade associations – of which many functions (meeting planning, dues billing, website management, accounting, payroll, etc.) – are identical. By contracting with a qualified AMC (and we’ve received outstanding proposals from five such organizations) the Alliance can save a significant amount of money in reduced salaries, benefits, and rent, among other items, without diminishing the personal service members have come to expect. Moreover, utilizing an AMC allows the Board greater control over the timing of relocating the Alliance home office to Washington, DC. The Alliance will select one of the five AMC providers in the first quarter of 2018 and will use the remainder of the year to transfer information and intelligence to the firm so that we can open the doors to the new business model on January 1, 2019. This move will help the Alliance to become a more financially sustainable organization for the foreseeable future and, ideally, allow us to invest more resources in advocacy, education, and information programs that deliver real value to members and enhance the viability of the fraternal model. I’m not naïve enough to think that the transition to this new model will be seamless or without unanticipated bumps in the road. But our goal is for those bumps to be felt internally, without disruptions in the quality of services provided to you. As always, our outstanding team of association professionals is here to serve you even as these dramatic changes in the Alliance’s organizational structure impact them in a very profound and personal manner. I would like to thank them once again for continuing to show incredible grace and dedication to Alliance members through the transition process. We will keep you up to date on the Board’s decision about the AMC, as well as those regarding the PAC, the Fraternal Caucus, the Legislative/Regulatory/Compliance Information Service provider, and the 2019 education program lineup through Bulletins and blog posts throughout 2018. In the meantime, please do not hesitate to contact me if you have any questions, comments, or concerns about what’s ahead in 2018.