By

New York

Producers who also broker viatical settlement contracts will not have to obtain a separate license if a change to a model regulation is fully adopted by the National Association of Insurance Commissioners.

During the spring NAIC meeting here, an amendment to the Viatical Settlements model regulation, under consideration since 2001, was affirmed by NAICs Life & Annuities “A” committee. The draft will now go up for a vote in June at the NAICs executive committee and plenary. The regulation was developed to implement NAICs Viatical Settlement model act.

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

The amendment was opposed by the life insurance industry, supported by viatical settlement companies and had mixed support from producer groups.

Life insurers said the model should be adopted without the change, meaning separate licenses would be required.

Failure to require separate licensing would create a blurring of lines between an industry focused on providing protection and one focused on making a profit from the purchase of life insurance contracts, said 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, she added.

Life insurers offer protection and financial security, but viaticals are factoring companies, making 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, Newark, N.J.

“Inappropriate viatical settlement transactions have the potential to do serious damage to the life insurance business,” he said. If an agent makes a bad decision and viaticates a contract and the viator dies within weeks of the viatication, who is responsible for that decision, an agent or company? he asked.

The National Association of Insurance Financial Advisors changed its position to oppose the measure, said Ron Panneton, NAIFA senior counsel, because the 2 areas are different businesses, and it is necessary to make sure people who get into the business know what they are talking about.

However, Wes Bissett, senior vice president-government affairs and state relations with the Independent Insurance Agents & Brokers of America, Alexandria, Va., said that creation of a separate license for viatical brokers establishes a “gag order” that restricts the relationship between “trusted” advisors and clients.

The viewpoint that a separate license would create a restriction was supported by SpreadtheRisks Kevin Hennosy, who noted that in jurisdictions that require a second license, only a handful had been issued, making it more difficult for a contract holder to have the option of viaticating a policy.

Larry Mirel, District of Columbia insurance commissioner, said today the reason for buying life insurance has shifted with many, including himself, buying the product as an investment from an investment advisor. “Arent we talking about different ways to invest money?”

Alan Buerger, CEO of Coventry First, Fort Washington, Pa., cited “routine” business functions for life insurance such as estate and family planning, and said that choosing to viaticate a policy is another business option for a client. Many clients have outlived their need for or their ability to pay for insurance, he said, and should be able to viaticate a policy with their own life agent.

This need is there, Buerger said, citing statistics from Milliman & Robertson estimating that nearly 88% of all universal life policies and over 85% of term policies do not mature in a claim. He added that Matthew Greenwald and Associates has found that 86% of senior citizens believe life insurance agents should inform clients about life settlements as an alternative to letting their policies lapse or surrendering them for cash value.

“This is an appropriate market freedom. It is an excellent amendment to a good product that needs a little tweak,” said Doug Head, director of the Viatical and Life Settlement Association, Orlando.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 19, 2004. Copyright 2004 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.