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Panel Eases Viatical Model Broker Licensing Provision

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NU Online News Service, March 17, 2004, 5:41 p.m. EST, New York – Insurance producers might not have to get separate licenses for brokering viatical settlement contracts.[@@]

The Life & Annuities “A” Committee at the National Association of Insurance Commissioners, Kansas City, Mo., has approved an amendment to the Viatical Settlements model regulation that would ease the proposed viatical settlement broker licensing requirements.

The committee made the move here at the NAIC’s spring meeting.

The NAIC’s executive committee and the full NAIC membership expect to vote on the draft at the NAIC’s summer meeting, in June.

The NAIC is developing the model regulation to help states implement the NAIC’s Viatical Settlement model act.

The model regulation amendment, introduced by Oklahoma Insurance Commissioner Carroll Fisher, states that a person who is licensed as a resident or non-resident life insurance producer for at least a year can operate as a viatical settlement broker.

The amendment drew opposition from the life insurance industry, support from the viatical settlement companies and mixed reactions from producer groups. Consumer advocate Kevin Hennosy of, Kansas City, Mo., supported the change.

Life insurers were the first up at bat during a hearing, citing both philosophical and practical reasons for adopting the model without the change.

Failure to require separate licensing would create a blurring of lines between an industry focused on providing protection and one that focuses on making a profit from the purchase of life insurance contracts, according to Lynn Boyd, senior director of long term care issues with the American Council of Life Insurers, Washington.

Insurers could be held responsible if there is no clear line between the 2 types of services, Boyd said.

Life insurers offer protection and financial security but viatical settlement companies are factoring companies that earn a profit on the spread between the purchase price and the face amount paid out upon the death of the viator, said George Coleman, vice president-government affairs and external affairs with Prudential Financial Inc., Newark, N.J.

“Inappropriate viatical settlement transactions have the potential to do serious damage to the life insurance business,” according to Coleman.

Ron Panneton, senior counsel with the National Association of Insurance Financial Advisors, Falls Church, Va., said NAIFA changed its position to oppose the measure because the 2 areas are different businesses and regulators should make sure that people who get into the viatical business know what they are talking about.

The Independent Insurance Agents & Brokers of America, Alexandria, Va., continues to support the original model regulation language.

Creating a separate license for viatical brokers establishes a “gag order” that restricts the relationship between “trusted” advisors and clients, according to Wes Bissett, the IIAB’s senior vice president-government affairs and state relations.

SpreadtheRisk’s Hennosy agreed with Bissett. Hennosy noted that jurisdictions that require a separate viatical broker license have issued only a handful of viatical broker licenses. That makes it more difficult for a contract holder to have the option of viaticating a policy, Hennosy said.

Alan Buerger, chief executive officer of Coventry First L.L.C., Fort Washington, Pa., said many clients choose to viaticate policies simply because they have outlived their need for the insurance or their ability to pay for the coverage. Those clients should be able to viaticate policies with their own life insurance agents, Buerger said.


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