NAIC Viatical Model Passes Without Licensing Requirement

By

San Francisco

With mixed support from state insurance commissioners, a viatical settlements model regulation was adopted by the National Association of Insurance Commissioners during its summer meeting here.

Removal of a provision in the model requiring a separate license for producers who recommend or sell viatical settlements drew the concern of insurers who said it made consumers vulnerable to producers who would not understand or would misrepresent the product.

But representatives of the viatical and life settlements industry said removal of the provision was necessary to provide needed advice on 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 provided state insurance departments with the opportunity to take action against abuses if an agent did not have a viatical license, according to Diane Koken, Pennsylvania insurance commissioner.

A viatical settlement is a more specialized and riskier transaction for a consumer and consequently, more protections are needed, said 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 and has both protection and investment components. If a life insurance contract is not performing as it should, a consumer should have the right to talk to the agent and explore options including a viatical settlement, Mirel said. In states that require separate licenses, he said, most producers do not get them.

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.

Other comments in support of the model included someone asking if a separate license would be needed for cash surrenders, estate planning because of its complexity, or retirement planning.

After the vote, Doug Head, executive director of the Viatical and Life Settlements Association of America, said it was a good decision and consumers could be protected through proper agent training.

Linda Lanam, vice president-annuities with the ACLI, said 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, ACLI would oppose not including a provision for separate licenses, although it supported the rest of the model.

ACLI will talk with companies to see if more education about viatical settlements is needed, she said, and it will also look at a model being developed by the National Conference of Insurance Legislators, which currently supports a separate licensing provision.


Reproduced from National Underwriter Edition, June 18, 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.