The Settlement Advisor And Fiduciary Concerns

Today, regulation of the life settlement industry is not the same in all states, and some states do not regulate the industry at all. Because of those differences, it is imperative that an agent or broker solicit bids only from providers that are both experienced and ethical.

A policy owner who goes through the standard bidding process must submit a questionnaire and authorize medical releases. The releases must comply with the privacy provisions of the Health Insurance Portability and Accountability Act of 1996, and all parties involved in the transaction must keep the information submitted confidential.

To ensure that the parties respect the policy owners confidences, it is essential that the agent or broker seek bids only from reputable providers that have proven track records of complying with the law and adhering to high ethical standards.

When lawyers conduct lawsuit settlement negotiations, they must share all offers with their clients. Similarly, agents or brokers helping with life settlement transactions must share all offers with policy sellers. The seller has the ability to make the final decision on which offer to accept.

To help the owner fully understand the structure of an offer, some states require the agent or broker to furnish the amount and method of calculation of the agent or brokers commission. Other states require only that the agent or broker furnish that information if the policy seller asks for that information.

A financial advisor who is helping a client evaluate life settlement offers should help the policy seller consider factors such as provider licensing, availability of institutional funding and the strength of the providers compliance department, as well as price.

Within 3 days after the seller has accepted an offer, the provider should transfer the purchase price to an escrow account. The policy seller then will have access to the funds within 3 days of the escrow agent receiving confirmation from the insurance company that title to the policy has been transferred to the provider.

After the transaction is completed, the provider may begin to call upon the insured or named representative of the insured to ask about the insureds health.

The agent or broker should make sure that the policy seller understands that, in states with life settlement regulations, the seller is entitled to a grace period, or a rescission period. During this period, the policy will revert to the possession of the policy seller if the seller chooses to cancel the transaction within 15 days of the date on which the funds were made available to the seller.

Furthermore, the policy seller is automatically entitled to the policy death benefit if the insured perishes within 15 days of the date on which the funds were made available to the owner. If the seller dies during the 15-day grace period or cancels the transaction, the provider must be reimbursed for the purchase price paid and for any premiums paid to keep the policy in force.

is assistant to the president at Life Equity L.L.C., Hudson, Ohio, a life settlement provider. He can be reached at [email protected].

Reproduced from National Underwriter Edition, April 29, 2003. Copyright 2003 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.