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NAIC Passes Viatical Model

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NU Online News Service, June 14, 2004, 7:12 p.m. EDT, San Francisco – The National Association of Insurance Commissioners has adopted a viatical settlements model regulation.[@@]

The model passed here at the Kansas City, Mo., group’s summer meeting despite controversy about a deleted licensing provision.

Insurers criticized the removal of a provision in the model that would have required a separate license for producers who recommend or sell viatical settlements. Insurers said the change makes consumers vulnerable to producers who do not understand the product or misrepresent the product.

But representatives from the viatical and life settlements industry said removing the provision will encourage agents to give needed advice about a viable service.

Commissioners lined up on both sides of the issue. New York, Pennsylvania and Tennessee were among the states that expressed reservations about deleting the licensing provision from the model.

That provision would have given state insurance departments the opportunity to take action against abuses if an agent did not have a viatical license, according to Diane Koken, Pennsylvania insurance commissioner.

Consumers who agree to viatical settlements need extra protection because negotiating a viatical settlement is a riskier, more specialized transaction than buying a life insurance policy, according to Paula Flowers, Tennessee commissioner.

However, Larry Mirel, insurance commissioner for the District of Columbia, argued that for many consumers, life insurance is one of their most important assets, an asset that has both protection and investment components. If a life insurance contract is not performing as it should be, a consumer should have the right to talk to his agent and explore viatical settlement options, Mirel said.

In states that require separate viatical settlement licenses, most producers do not get them, Mirel said.

Kevin McCarty, director of insurance in the Florida Office of Financial Services, said it was difficult to see how a separate license would better protect consumers.

One opponent of the separate licensing requirement asked whether a separate license would be needed for agents who advise clients about cash surrenders, estate planning and retirement planning.

After the vote, Doug Head, executive director of the Viatical and Life Settlements Association of America, Orlando, Fla., said that the NAIC made a good decision and that consumers could be protected through proper advisor training.

Linda Lanam, vice president-annuities with the ACLI, said that the ACLI was happy that a number of commissioners recognized that viatical settlements are not insurance transactions.

Lynn Boyd, an ACLI representative, said that, at the state level, the ACLI would oppose not including a provision for separate licenses, although it supports the rest of the model.

The ACLI will talk with companies to see if more education about viatical settlements is needed, she said. The group also will look at a model being developed by the National Conference of Insurance Legislators, Albany, N.Y., which now supports a separate licensing provision, Boyd added.


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