Companies that help customers pay for life insurance policies are forming a trade group.
The Atlanta office of Lord Bissell & Brook L.L.P. is helping to run the new trade group, the Life Finance Association of America, and the founding president is Larry Simon, president of Life Settlement Solutions Inc., San Diego.
Life premium financing is the practice of using financing from some party other than the customer or the insurer to fund the purchase of a life insurance policy.
During a conference call on Jan. 23, premium financing industry participants discussed a recent opinion concerning a life premium finance transaction that was issued by the Office of General Counsel at the New York State Insurance Department.
One portion of the opinion states that “no insurable interest exists in connection with certain life premium finance transactions.”
Office of General Counsel officials go on to describe what they believe to be transactions that are not permissible under New York insurance law, such as those that appear to be made solely for the purpose of creating a policy that later can be resold, the LFAA says.
At press time, a copy of the opinion was not available.
The LFAA hopes to establish more clarity about the New York opinion for carriers, producers and life settlement companies involved in life premium financing, according to Brian Casey, a Lord Bissell partner.
Participants in the LFAA conference call wondered whether the scope of the New York opinion could expand to prohibit all premium financing.
Premium financing should be an acceptable practice “as long as there is no settlement transaction right out of the box,” Casey says.
Financing arrangements involving insureds who are almost certain to enter into the settlement process is different from other types of financing arrangements, Casey says.
In many cases, the customers using the financing are wealthy, sophisticated investors, and whether they will sell policies is not a given at the time of purchase, speakers said.