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STATE INSURANCE REGULATION

Enactment of financial services modernization, coupled with continuing frustration over the lack of insurance regulatory uniformity, has sparked new interest in insurance regulatory reform. Three options have evolved for achieving reform: work through the National Association of Insurance Commissioners (NAIC) for reform; enactment of optional federal regulation; or create uniformity and efficiency via adoption of national standards.

 

Virtually every industry stakeholder—insurance companies, agents and brokers, consumers and regulators—has voiced significant concerns with the current regulatory system, characterizing it as slow, inefficient and a patchwork of different laws and regulations that adds unnecessary expense.

 

IIABA is among the leaders in advocating the continuation of state regulation, but with significant reforms.  Although the need for greater efficiency and uniformity is clear, IIABA believes optional federal chartering, federal regulation and the creation of a new federal bureaucracy goes too far—the equivalent of throwing the baby out with the bath water.

Rather than a one-size-fits-all scheme, IIABA is advocating a pragmatic, middle-ground approach that proposes federal legislative tools to fix state insurance regulation by creating a more uniform and streamlined regulatory system. This approach would overcome state-level impediments to reform and build on, rather than dismantle, the states’ inherent strengths—diversity, geographical uniqueness, innovation and responsiveness to consumers—to meet the challenges of a rapidly changing insurance environment.

 

IIABA opposes federal regulation of insurance, whether it is direct regulation or optional federal chartering. That is why IIABA stands against the Insurance Consumer Protection Act (S. 1373), introduced by Sen. Ernest Hollings (D-S.C.), that would repeal the McCarran-Ferguson Act and create a commission to serve as the sole, mandatory regulator of all interstate insurers offering property-casualty insurance, as well as life insurance. The bill also would grant the commission sweeping powers to investigate the organization, business, conduct, practices and management of any person or corporation in the insurance industry, presumably extending to independent agents and brokers.

 

IIABA believes a variety of federal legislative “tools”— national standards with state enforcement, national reciprocity or multi-state uniformity, incentives and preemption of certain state laws—can be used on an issue-by-issue basis to achieve reform. This approach offers the best solution because it will promote more uniform standards and streamlined procedures from state to state; protect consumers and enhance marketplace responsiveness; and emphasize that oversight can best be met by improving the state-based system. The result for all stakeholders would be a more efficient, modern and workable system of state regulation.

 

IIABA opposes efforts by the U.S. Office of the Comptroller of the Currency (OCC) to preempt state insurance laws and regulations. Via regulatory fiat, the OCC is attempting to free national banks from state insurance oversight. All facets of state law are threatened if the OCC deems that they “significantly interfere” with the ability of national banks to sell insurance.

 

IIABA POSITION

IIABA supports reform and modernization of state insurance regulation by making the system more uniform and streamlined. IIABA opposes creation of an optional federal chartering system and federal insurance regulation. IIABA is advocating a pragmatic reform approach that proposes federal legislative tools, such as national standards, that will create a more uniform and streamlined state-based regulatory system.

 

TAX REFORM

The national economy is bouncing back, but Main Street America knows more improvement is needed. Main Street businesses are the engine that drives a healthy U.S. economy, and the slow, but steady, growth has made it tougher for business owners—small and large alike—to create the new jobs that will lead to complete economic health.

IIABA’s 300,000 members are supporting several tax initiatives that will provide a beneficial boost to their operations and the overall U.S. economy.

 

IIABA believes Congress should address a discrepancy between marketplace reality and the tax code’s treatment of intangible assets when they are acquired as part of the purchase of another agency or brokerage. Current law requires these assets be written off over 15 years. Business experience shows that an intangible asset, such as a customer list, has a shelf life of just five years. Through a quicker depreciation schedule, Main Street service-oriented businesses will have more cash to reinvest in their operations. IIABA is supporting H.R. 1222 offered by Reps. Mark Foley (R-Fla.) and Max Sandlin (D-Texas), as well as S. 1371 offered by Sens. Jim Bunning (R-Ky.) and John Breaux (D-La.). The legislation would amend Section 197 of the Internal Revenue Code to allow the write-off of the first $5 million of intangible assets in the year of purchase, with the remainder to be depreciated ratably over 14 years.

 

IIABA supports making permanent the income tax rate reductions in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Many Main Street businesses, including 35 percent of IIABA member agencies and brokerage firms, are formed as Subchapter S corporations and thus pay taxes at higher individual rates. Lower income tax rates would enable these businesses to reinvest in the growth of their operations and, simultaneously, in the growth of the overall economy. It is clear that the tax cuts have helped turn around the economy. 

 

IIABA also supports raising the individual alternative minimum tax exemption so Americans, especially small business owners, are not surprised by additional tax liability they did not realize they were facing.

 

IIABA is also calling on Congress to definitively spell out whether the elimination of estate taxes will extend beyond its December 31, 2010 sunset. Estate taxes irreparably harm a family-owned business’s ability to pass on to the next generation. If business owners and farmers know that their life investments will be passed onto their heirs with minimal or no tax implications, they will be more apt to continue investing in its growth as they advance in years. Legislation sponsored by Rep. Jennifer Dunn (R-Wash.) has passed the House and is now awaiting action in the Senate.

 

IIABA POSITION

IIABA supports a market-based depreciation schedule of five years for intangible assets (such as the customer list of an independent agency or brokerage), making permanent the income tax rate reductions in EGTRRA; raising the alternative minimum tax exemption; and making permanent the elimination of estate taxes in EGTRRA. IIABA believes these tax initiatives will expand business opportunities and lead to job creation—both critical to strengthening the economic recovery.

 

 

ASBESTOS LITIGATION REFORM

IIABA is calling on Congress to reform asbestos litigation in order to ensure truly sick people are fairly compensated and to save the jobs and businesses that are being destroyed by unnecessary litigation.

 

Because asbestos was phased out of most non-essential uses by the early 1980s, most experts predicted that exposure claims would have stabilized by now. But the opposite has happened; the number of claims is growing exponentially. At the current rate, the total number of claims could top 2.5 million, and the insurance industry’s total liability could top $275 billion.

 

The sudden claims explosion comes from people who have little or no impairment. Of the 600,000 claims currently pending, the majority are filed by people who are not sick. The New York Times has reported that the latest surge in asbestos claims includes many healthy plaintiffs. In 2001, both the RAND Institute and Tillinghast-Towers estimated that at least 90 percent of claims are filed by plaintiffs who do not have asbestos-caused cancer. Amazingly, about two-thirds of compensation thus far has gone to claimants with non-malignant illnesses.

 

IIABA supports H.R. 1586, the Asbestos Compensation Fairness Act, a common-sense solution that uses medical criteria as an overall factor for compensation. This bill, introduced by Rep. Chris Cannon (R-Utah), would prohibit the filing of asbestos cases in which necessary medical criteria are not established, and it also would eliminate punitive damages.

In contrast, S. 1125, the Fairness in Asbestos Injury Resolution (FAIR) Act, has some serious flaws. It adds an additional $22.5 billion to the amount insurers must contribute to an asbestos trust fund, in addition to the $45 billion insurers already have agreed to contribute. Also, it does not adequately address the issue of pre-existing medical conditions. Furthermore, the bill could drive some businesses into bankruptcy, contributing to job losses, additional social-service burdens, and destabilization of the insurance industry.

 

Independent insurance agents and brokers are concerned that the asbestos litigation crisis could impact other insurance markets. Faced with more than a quarter-trillion dollars of potential claims, insurance companies are increasing reserves for asbestos-related claims. While this is a sound business decision, these increased reserves also could significantly impact company operations in other markets, their capacity and their rates.

 

Asbestos litigation reform is a top legislative priority for IIABA. The Association believes Congress must bring order to the out-of-control asbestos litigation system. To that end, IIABA is advocating a common-sense reform proposal: If you are sick from asbestos exposure, then your financial and medical needs should be compensated. But if you are not currently sick, you should not receive financial compensation unless you become ill. This approach would bring a measure of rationality to asbestos litigation and remove the “get-rich-quick” mentality from the judicial system.

 

IIABA POSITION

IIABA believes Congress must bring rationality to the out-of-control asbestos litigation system. IIABA urges Congress to immediately act on asbestos litigation reform by first spelling out that a claim will not be heard until an individual becomes sick from asbestos exposure, and then addressing other underlying litigation problems. IIABA will work to ensure that common-sense medical criteria are established, so those truly deserving can receive fair compensation.

 

 

FEDERAL CROP INSURANCE

IIABA has been a key player in the evolution of the Federal Crop Insurance Program (FCIP) as it moved from a federally provided program to a private-sector/government-partnership project. Initially, crop insurance was sold, delivered and administered exclusively by federal employees. Today, the federal government reinsures policies that are administered by the private insurance companies and delivered to farmers by independent insurance agents and brokers.

 

Congress has addressed the needs of American farmers by frequently modifying the program since it was enacted in the early 1980s. IIABA will strive for continued cooperation between the private sector, Congress and the U.S. Department of Agriculture (USDA) through its Risk Management Agency (RMA) to provide an improved product.

IIABA’s objectives are to ensure farmers are well-served and protected, and independent agents continue to be the most effective distribution channels for crop insurance. Any reforms should continue to enhance and promote private-sector delivery as well as the crop insurance and servicing expertise of independent agents, and their knowledge of the insurance needs of the American farmer. It is imperative that free-market incentives remain to ensure maximum coverage of farms. 

 

IIABA has pointed out significant problems with the pilot “Premium Discount Plan” (PDP) program. PDPs would reduce the role of independent agents in the delivery of crop insurance to the detriment of farmers. IIABA opposed a previously approved pilot program because it encouraged rebating by employing networks of affiliates that, in offering crop insurance at a reduced premium, bundled this discount with offers of other goods and services. These tying arrangements are strictly prohibited under the Standard Reinsurance Agreement (SRA), and most tying arrangements are anti-consumer, which is why they are prohibited under both federal and state statutes. A PDP has again been approved for the 2004 crop insurance year, and IIABA is continuing its dialogue with Bush Administration officials to underscore significant flaws in this program. 

 

IIABA believes a program such as the PDPs that is vulnerable to rebating, anti-consumer tying arrangements or unfair marketing would undermine the integrity of the FCIP. The precedent established by the PDP jeopardized the efficacy of the crop insurance delivery system. 

 

At the end of last year, FCIC announced that the SRA would not be renewed for the 2005 reinsurance year. RMA announced it would immediately begin renegotiation of the SRA in order to have a new agreement in place by the start of the 2005 reinsurance year. IIABA is working with RMA, Congress and various industry coalitions to ensure that RMA’s 2005 SRA provides a strong foundation for the entire crop insurance industry.

 

IIABA POSITION

IIABA strongly believes that local, state-licensed insurance agents selling for private insurance companies can best handle the sales and servicing of the FCIP. IIABA opposes the sale of crop insurance through federal agencies—RMA, Farm Services Agency (FSA) or other federal entities. IIABA is concerned that PDPs circumvent state insurance licensing laws and are vulnerable to rebating, anti-consumer tying arrangements and unfair marketing.

 

 

 

MEDICAL & LEGAL LIABILITY REFORM

The rapid rise in frivolous and unwarranted lawsuits is hurting businesses, consumers and the economy. Legal reform is a hotly debated topic in the 108th Congress, and bipartisan efforts on several fronts in both chambers are keeping tort reform on the table. 

 

Sen. Charles Grassley (R-Iowa) reintroduced the Class Action Fairness Act (S. 274) last year, but the Senate failed to pass cloture, which essentially blocked the bill. Despite efforts by some senators to work out a compromise, a vote originally scheduled for January has been sidetracked by three amendments that would detract from the bill’s intention to move interstate class action suits to federal courts. 

 

IIABA supports S. 274 because it would allow litigants to move interstate class action suits to federal courts that are generally more protective of consumer and defendant rights. Federal courts are better equipped to deal with these complex cases. This legislation would not alter an individual’s right to sue, and there are a number of other strong consumer protections in the bill. The American Bar Association last year endorsed class action reform—a major philosophical shift for the nation’s largest legal group. Grassley’s legislation enjoys bipartisan support. Reps. Bob Goodlatte (R-Va.) and Rick Boucher (D-Va.), both members of the House Judiciary Committee, have introduced a largely identical class action reform bill (H.R. 1115) in that chamber. 

 

Double-digit increases in medical malpractice insurance premiums are prompting doctors to flee states with the highest rates, refuse to perform high-risk procedures, practice defensive medicine, or retire early. Unwarranted lawsuits are crippling the delivery of health care in America and rapidly driving up health insurance costs for everyone. 

IIABA and its coalition partners are actively seeking enactment of medical liability reform legislation in this session of Congress. IIABA supports the goal of the Help Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act (H.R. 5), introduced by Rep. James Greenwood (R-Pa.). This legislation would improve patient access to health care services and provide improved medical care by reducing the excessive burden the current liability system places on the health care delivery system. H.R. 5 passed the House, but has become gridlocked by parliamentary maneuvers in the Senate. As a result, Senate Republican leaders have announced they will not attempt to pass a broad-based reform bill, but will instead focus on enacting smaller, piecemeal legislation. IIABA will continue to push for all legislation that will effectively resolve the medical liability crisis. 

 

IIABA POSITION

IIABA supports legal reform to discourage frivolous and unwarranted lawsuits. IIABA seeks a resolution to the medical liability crisis that will safeguard public access to medical care. IIABA also supports the Class Action Fairness Act (S. 274), which would allow litigants to move interstate class action suits into federal courts that better protect consumer and defendant rights while not hindering an individual’s right to sue.

 

 

HEALTH INSURANCE REFORM

In the 108th Congress, the health care reform debate is focused squarely on expanding coverage for uninsured Americans. Currently, an estimated 43 million Americans are without health insurance coverage. 

 

IIABA is working closely with the Administration and key members of Congress to craft legislation that will help more Americans find affordable health insurance coverage. 

 

IIABA believes the key to providing better access to health insurance is through the passage of market-based reforms. IIABA supports such market-based reforms as creating association health plans (AHPs) and expanding medical savings accounts (MSAs). 

 

President Bush is employing a similar approach to address this issue, pursuing a plan to allow employees and employers to make tax-free contributions to MSAs. The Administration also is backing a plan to provide tax credits to help people buy health insurance. These credits would be refundable, giving low-income Americans who have no federal tax liability the funds to use toward the purchase of health insurance coverage. 

 

Specifically, the President’s budget proposal for fiscal year 2004 included refundable tax credits to make health insurance more affordable to millions of low-income Americans. The President has proposed to establish refundable tax credits of up to $1,000 for individuals and $3,000 for families to help low-income workers buy health insurance coverage. 

 

Also, two proposals in Congress would allow tax deductions for eligible long-term care insurance premiums for taxpayers, their spouses and dependents. The House version of the bill, H.R. 2096, was introduced by Rep. Nancy Johnson (R-Conn.); the Senate version, S. 1335, was introduced by Sen. Chuck Grassley (R-Iowa).  Both versions also would allow deductions for long-term care insurance to be offered under “cafeteria” plans and flexible spending arrangements, as well as limited income-adjusted credits for eligible individuals with long-term care needs. 

 

Some in Congress are similarly preparing a tax-based plan to help people afford health insurance or expand their current coverage. 

 

IIABA is supporting the components of the President’s budget that will help increase the numbers of Americans with health insurance and will address these kinds of health care reforms as they arise in the Congress.

 

IIABA POSITION

IIABA supports health care reform, but legislation must be carefully crafted to avoid increasing costs, raising the number of uninsured or damaging the role of the private sector. IIABA believes Congress must increase access to health insurance so uninsured people can obtain the coverage they need. This can be accomplished through creation of appropriately balanced association health plans and expansion of medical savings accounts.

 

 

DO NOT CALL/DO NOT FAX/ANTI-SPAM LEGISLATION

IIABA is concerned about legislation that could make it difficult for associations, nonprofit organizations and their for-profit affiliates to send legitimate e-mail communications to members who have opted to receive those updates via joining an association. 

 

While the Big “I” agrees with the need for consumer safeguards regulating unsolicited marketing communications, it seeks to have legitimate business communications—those in which consumers have “opted in” to receive them—exempted from legislation designed to reduce bulk e-mails. 

 

Last year, IIABA advocated an exemption to the CAN-SPAM Act that would have protected associations, nonprofit organizations and their for-profit subsidiaries from being covered by this law. While the Big “I” was successful in getting Rep. Richard Burr (R-N.C.) to read a favorable interpretation of the law into the Congressional Record, procedural limitations made it impossible for the clarifying language to be inserted into the law passed by Congress. IIABA will continue to push for further clarifications that will protect associations, nonprofit organizations and their for-profit subsidiaries from being targeted unfairly by this law. 

 

On “Do Not Call/Do Not Fax” rulings, IIABA is working to secure a permanent exemption for existing business relationships. An agent, broker or any business should be able to call or fax individuals or organizations with which it has existing business relationships.

 

IIABA is also working to establish a “pattern of practice” provision that would protect the right to follow up on legitimate verbal authorizations to call people. Under such a provision, telemarketers would be given a “three-strikes-and-you’re-out” guideline, which would protect them from action on at least the initial call.

 

IIABA POSITION

While it is understandable that Congress would enact laws prohibiting unsolicited telephone calls, faxes and e-mails, IIABA believes Congress should protect legitimate communications in cases where individuals have opted to receive them, or a business has an established business relationship with a customer.   In the case of membership lists, in which members have agreed to receive bulk communications, these legitimate contacts are crucial to keeping an organization’s members informed. Since these communications are received voluntarily, it is IIABA’s position that they should be protected explicitly under any laws passed to curb unsolicited communications.

 

 

FLOOD INSURANCE LEGISLATION 

IIABA supports the National Flood Insurance Program (NFIP), a self-supporting program that provides a reliable system of payments for individuals whose properties have suffered flood damage. The NFIP lessens the need for federal disaster assistance funding following a flood. Independent agents and brokers play a vital role in the delivery system for flood insurance, and it is IIABA’s position that the program should be continued and strengthened. 

 

IIABA is pushing for the renewal of the program, which was passed by the House last year and awaits action in the Senate. Senators from both parties are reportedly working on legislation that would target the worst repetitive flood-loss properties and increase funding for flood-mitigation steps. The House-passed bill, H.R. 253, is the starting point for discussion in the Senate. 

 

It is clear that the NFIP does need reforms to address operating losses and make the program actuarially sound. IIABA is advocating five main principles for reform.  They include: 

  • Strengthening NFIP building regulations—Building requirements should be tightened to ensure that properties are built to minimize potential flood damage and to discourage unwise construction in flood plains.

  • Increasing compliance with the mandatory purchase requirement—Making the purchase of flood insurance mandatory for any property in a flood plain having a one percent or greater chance of flooding would help the program collect needed additional premiums. This would help balance the NFIP’s books and fund the payment of future losses.

  • Providing additional resources for flood-loss mitigation efforts—Funding should be available to help the NFIP buy out repetitive flood-loss properties and also to assist in the structural modification of properties to prevent losses.

  • Stopping abuse of the program through multiple claims—While the overwhelming majority of victims of natural disasters bought their homes without any desire to file claims for flood damage, the few who do buy high-risk property with intent to file claims are a very expensive minority. Those who file repetitive claims should be considered in a “high-risk, non-classified” system with increased rates and less than full guarantees. This will help boost the financial soundness of the NFIP.

  • Requiring mandatory disclosures of flood information—Many individuals buy their properties without receiving information about flood risks. Mandatory disclosure of the flood history of properties will help buyers make better-informed decisions, which would keep NFIP from having to pay for artificially over-valued properties.

 

Additionally, IIABA supports provisions in H.R. 253 that would change the NFIP reauthorization period from one year to five years and change the expiration day from the end of the year to another time, to avoid having the program expire in conjunction with the adjournment of Congress. In 2002, Congress adjourned without reauthorizing this vital program, which left it in limbo. While Congress wisely acted swiftly upon its return to renew the program, action is needed to ensure such a lapse cannot occur again.

 

IIABA POSITION

Reauthorization and reform of the NFIP is vital to protecting property owners from flood losses. Reforms are necessary to ensure the continuation of the program, both from a legislative and a fiscal standpoint. IIABA will work with other willing coalition partners to ensure that this vital program is renewed and continued in 2004 and in the future.

 

INSURPAC

INDEPENDENT INSURANCE AGENTS & BROKERS OF AMERICA POLITICAL ACTION COMMITTEE

 

InsurPac, the political action committee (PAC) of the Independent Insurance Agents & Brokers of America (IIABA), was established in 1975 to complement IIABA’s legislative program. It is the largest property-casualty insurance industry PAC in the country. 

 

By pooling the voluntary, individual financial contributions of thousands of independent insurance agents and brokers, InsurPac helps elect candidates and re-elect members of the U.S. House of Representatives and U.S. Senate who share IIABA’s business philosophy. IIABA’s government affairs department, in conjunction with the appropriate state associations, selects the federal campaigns that are to receive InsurPac financial support. 

 

InsurPac and IIABA are separate but affiliated organizations. InsurPac’s governing board of trustees is appointed by IIABA’s Executive Committee. All InsurPac disbursements are reported to the Federal Election Commission (FEC). Copies of InsurPac reports are available for purchase at the FEC office in Washington, D.C.

 

INDEPENDENT INSURANCE AGENTS & BROKERS OF AMERICA GRASSROOTS PROGRAM

HOW TO PROTECT AND PROMOTE YOUR BUSINESS 

The Independent Insurance Agents & Brokers of America’s (IIABA) grassroots program is the backbone of legislative advocacy on agent and broker issues on Capitol Hill and in state capitals. IIABA’s 300,000 agents, brokers and their employees are a formidable grassroots constituency that ranks among the most respected on Capitol Hill. They play a key role in shaping legislation involving insurance regulation issues, small business concerns, tax issues, pension reform, tort reform, privacy issues, natural disaster reform, terrorism insurance issues and health care reform. 

 

IIABA’s grassroots strength lies in the number of involved agent and broker activists that can be mobilized at a moment’s notice by an “Action Alert” system. These calls to action are shared with all employees in an agency or brokerage firm, including support staff and producers, so they, too, can have their voices heard on issues affecting their livelihood. 

Additionally, IIABA encourages its members to be active in local, state and national politics. In fact, more than 35 former insurance professionals currently hold seats in the U.S. Congress. With literally hundreds or thousands of agents, brokers and their employees in every congressional district, IIABA’s grassroots activists not only play an important role in their communities as local business and civic leaders, but also play a critical role in supporting federal, state and local candidates for elective office. 

 

New challenges in Washington and the financial services marketplace demand that more IIABA members become informed and involved in the political arena. IIABA’s grassroots program will play a vital role in shaping and promoting the agency system. Call IIABA at (202) 863-7000 to become actively involved in the Association’s grassroots efforts or to obtain legislative information and political background materials.

 

 

IIABA GOVERNMENT AFFAIRS STAFF 

CAPITOL HILL OFFICE
412 First Street, S.E.Suite 300
Washington, D.C. 20003
Phone: (202) 863-7000
Fax: (202) 863-7015
www.independentagent.com

 

Robert A. Rusbuldt
Chief Executive Officer
E-mail: bob.rusbuldt@iiaba.net  

 

 

LEGISLATIVE STAFF 

Charles E. Symington, Jr.
Senior Vice President of Federal Government Affairs
E-mail: charles.symington@iiaba.net 

 

Justin M. Roth
Vice President of Federal Government Affairs
E-mail: justin.roth@iiaba.net 

 

Patrick O’Brien
Senior Washington Representative & Grassroots Coordinator
E-mail: patrick.o’brien@iiaba.net

 

Wes Bissett
Senior Vice President of Government Affairs and State Relations
E-mail: wes.bissett@iiaba.net

INSURPAC

Nathan M. Riedel
Political Director
E-mail: nathan.riedel@iiaba.net

 

Anne-Wesley M. Roberts
Manager, Political Events and InsurPac
E-mail: anne-wesley.roberts@iiaba.net

 

COMMUNICATIONS
Susan J. Nester
Director of Broadcast Media
E-mail: susan.nester@iiaba.net

 

Cliston L. Brown
Manager of Public Affairs
E-mail: cliston.brown@iiaba.net

 

CAPITOL HILL STAFF

Kathleen M. Bilotta
Executive Assistant to the CEO
E-mail: katie.bilotta@iiaba.net 

 

Tabitha S. Gass
Exec. Asst. to the Sr. V.P. of Federal Government Affairs
E-mail: tabitha.gass@iiaba.net

 

Angela T. Waters
Receptionist
E-mail: angela.waters@iiaba.net 

 

Timothy R. Crist
Office Administrator
E-mail: tim.crist@iiaba.net 

 
 
   
 

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