Industry Concerned That Victim Bill Penalizes Life Insurance Policyholders
The portion of legislation passed in the aftermath of the Sept. 11 terrorist attacks is raising concern in the life insurance industry. The bill says that any compensation paid to victims is being reduced by amounts received from any ‘collateral sources.’
Collateral sources, as defined in the legislation, include “life insurance, pension funds, death benefit programs, and payments by Federal, State, or local governments related to the terrorist-related aircraft crashes of September 11, 2001.”
Industry spokespersons contend that this results in reduced compensation for those victims who had these other benefits, specifically citing life insurance policies. Compensation paid out to these families will be net of any life insurance proceeds that are received as a result of the attacks, they say.
“If somebody had individual life insurance, which means they planned for their future, they spent their own money, they did their own preparedness, they will receive reduced benefits” says Ann Hartmann, president of the Society of Financial Service Professionals.
“It does not seem to us that it is fair to use that as part of the equation,” she says.
David Woods, president of the Life and Health Insurance Foundation for Education, agrees. “We’re concerned that this provision in the law sends a message to the general public that those who buy life insurance are being penalized for acting responsibly and protecting their families.”
Woods feels that the message being sent to the public by this bill is contrary to LIFE’s message of the importance life insurance plays as part of a financial plan.
Bob Nelson, president of the National Association of Insurance and Financial Advisors, shares his viewpoint. “It is just grossly unfair to think that we should cut out those people who were prudent to do the planning, it sends a terrible message.
“Whether or not they have collateral sources is truly not the issue,” continues Nelson. “They’re painfully penalizing people for doing something that was such a right thing to do; it seems cruel to include that in the equation.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 21, 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.