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Life Health > Life Insurance > Life Settlements

NCOIL May Act On Market Conduct, Life Settlements Models

By Jim Connolly

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NCOIL May Act On Market Conduct, Life Settlements Models

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Action on market conduct and life settlement model acts and a resolution on the need for an extension to the Terrorism Risk Insurance Act of 2002 are part of the agenda for a meeting of state insurance legislators in Chicago that started last Friday.

Other issues to be examined during the summer meeting of the National Conference of Insurance Legislators, Albany, N.Y., include a discussion on corporate governance.

The American Council of Life Insurers, Washington, says it will present information on investor-owned life contracts and the potential negative effect they could have on the industry. Insurers have raised concern over the growing use of a product called life insurance and life annuity contracts (LILACs) and the potential whittling away of the concept of insurable interest.

Two models that could receive the full support of NCOIL are the Market Conduct Model Surveillance Model Act and the Life Settlements Model Act.

Discussion of changes to the market conduct model involves several substantive points and technical wording issues. Among the concerns to be discussed are whether a cost estimate or actual budget must be given to a company when it is going to be examined; whether a company should be allowed an administrative or an informational hearing if it disagrees with the findings of an examination; and, how the concept of accepting the market conduct exam results of another state should be put into effect.

Trades that are expected to weigh in on the model include the American Insurance Association, the ACLI, the National Association of Mutual Insurance Companies, and the Property Casualty Insurers Association of America. Birny Birnbaum, executive director of the Center for Economic Justice, also is offering suggestions so the model can advance with broad support.

The life settlement model includes provisions that would require separate licensure to help transact life settlements. The provision recently was removed from a model adopted by the National Association of Insurance Commissioners, Kansas City, Mo., because of objections from life settlement companies.

However, the model also includes a disclosure provision that would require insurers to tell policyholders about the possibility of a life settlement at points of contact with the contract holder. Another feature of the model would be to provide both initial and ongoing education.

Bruce Ferguson, ACLI senior vice president-state affairs, says the requirement would put companies in the position of marketing life settlement contracts, a requirement that is outside the bounds of the contract with the policyholder.

Ferguson says the issue of insurable interest also will be raised. He adds that ACLI opposes the expansion of the definition of insurable interest because it could raise questions about whether the inside buildup and tax benefits of life insurance should continue. It also raises concerns that insurance will become a commodity, Ferguson adds.

He says ACLI also opposes advancing an NCOIL model on genetic testing that would limit its use in underwriting.

However, NCOIL Deputy Executive Director Susan Nolan says the issue is an important one for state legislators and the model will offer them a way to address the issue.

A vote also is expected on a resolution that calls for an extension of TRIA and the inclusion of group life in that extension, according to Tim Tucker, NCOIL director of state-federal relations.

Reproduced from National Underwriter Edition, July 16, 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.

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