Life insurers won a victory against life settlement companies here at the recent summer meeting of the National Conference of Insurance Legislators, Albany, N.Y.[@@]
Life settlement companies wanted NCOIL to amend a life settlement model law so that it would require insurers to notify policyholders about the existence of the life settlement option.
Life insurers vehemently opposed the measure, arguing that they should not have to advertise the life settlement companies’ services.
“The mandatory notice requirement is without precedent,” said a representative for the American Council of Life Insurers, Washington. “Insurers should not be required to publish notice suggesting eligibility for a product for which many policyholders will not be eligible and about which insurers cannot answer questions.”
Life settlement companies buy life benefits from policyholders at a discounted price. The companies once focused on buying policy benefits from terminally ill patients, but they have responded to the success of new AIDS drugs by shifting to buying benefits from policyholders who are over 65 and have life expectancies of 4 to 15 years.
The lawmakers who belong to NCOIL passed life settlement model amendments but left out the notice provision.
Lawmakers did throw a bone to the life settlements industry, by taking out separate licensure requirements for life settlement investment agents as well as a requirement that brokers who work directly with policyholders get 24 hours of pre-licensing education.
But it was the notice requirement that incurred the most life industry wrath.
Life industry representatives contended that insurers have no way of knowing whether life settlements will be “available alternatives” for a particular insured or whether they would be in the policyholder’s best interest.
“Insurers and their agents should be focused on keeping policyholders connected to their policies — not on options that would take away the death benefits payable to the insured’s family and others depending on the insured’s financial support,” the ACLI representative said.