Efforts to develop product standards for the new Interstate Insurance Product Regulation Commission have triggered a debate about policyholder property rights.
Members of a working group at the National Association of Insurance Commissioners, Kansas City, Mo., are talking about whether insurers can ask if applicants have discussed the possibility of a life settlement and whether insurers can include ‘right of first refusal’ clauses in life insurance contracts.
The working group is developing the standards the IIPRC will need to process life product filings for states participating in the Interstate Insurance Product Regulation Compact.
Working group members have agreed to let insurers ask in an application whether an applicant already has entered into an agreement to settle a contract. Carriers also could also ask if a policyholder has ever sold other contracts.
Representatives for the American Council of Life Insurers, Washington, say insurers should be able to ask about applicants’ intent to sell policies to life settlement companies.
An insurer has a right to evaluate an application and decide if it wants the applicant’s business, says Michael Lovendusky, an ACLI associate general counsel.
All jurisdictions have been approving questions about applicants’ intent to settle policies, says Miriam Kroll an ACLI vice president.
But Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, is objecting to the idea of letting insurers ask broad questions about applicants’ interest in selling policies.
“Don’t take away the basic rights to viaticate or settle policies,” Birnbaum says.
If insurers are worrying about speculators financing the purchase of policies simply to create life settlement opportunities, application questions should address that specific issue, Birnbaum says.