Consumer advocates told regulators there is a place for a secondary market of life insurance policies.
A secondary market had made other markets such as the national mortgage business more vibrant and it will make the insurance market healthier, too, says Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas and an NAIC funded consumer representative.
The remarks were made during the consumer liaison meeting at the summer meeting of the National Association of Insurance Commissioners here, as organizations including the American Council of Life Insurers, Washington; the Life Insurance Finance Association, Atlanta; the Life Insurance Settlements Association, Orlando, Fla.; and the Life Settlement Institute offered their suggestions for change as regulators contemplate changes to the Viatical Settlement Model Act before the NAIC’s Life and Annuities “A” Committee.
Jim Poolman, North Dakota insurance commissioner and chair of the “A” Committee, said the committee would compare the trade group proposals and continue to consider the possibility of a 5-year moratorium on the settlement of life insurance contracts.
In explaining why he thought a secondary market is good for consumers, Birnbaum pointed to the mortgage market, where the secondary market has brought in more capital. Of particular importance is that it would address “the monopoly situation” that he said currently exists. The secondary market can offer a “competitive option” to nonforfeiture and surrender values that would be available under the contract, he added.
The speculator-initiated life insurance was a subset of the secondary market that “is certainly not something I would encourage and would probably discourage,” Birnbaum said, but he added that stifling the secondary market would hurt consumers.