Two issues that will be discussed this week when the National Association of Insurance Commissioners meets for its fall meeting in St. Louis are a new draft of the Viatical Settlements Model Act as well as the procedure for establishing product standards for the Interstate Insurance Product Regulation Commission.
In the latest effort to reach consensus on changes to the viatical model, North Dakota Commissioner Jim Poolman, who also chairs the NAIC’s Life & Annuities “A” Committee, released a 39-page draft of a revised model.
Key points in the model include a ban on settling a life insurance contract for 5 years after contract issuance or at any time prior to the application or issuance of the policy.
The draft leaves exceptions for circumstances such as the death of the viator’s spouse or divorce of that spouse.
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The model also includes disclosure requirements for viatical settlement brokers, viatical settlement providers and life insurance companies.
Poolman says the draft is a starting point for discussion that he hopes will move the model out of “A” committee to executive and plenary by the end of the year so that it can be ready for commissioners and state legislatures at the start of 2007.
The initial reaction of insurers and producers is support for the concept, says Michael Lovendusky, associate general counsel with the American Council of Life Insurers, Washington. Lovendusky says industry support includes the Association for Advanced Life Underwriting and the National Association of Insurance and Financial Advisors, both in Falls Church, Va.; and the National Association of Independent Life Brokerage Agencies, Fairfax, Va.
Lovendusky notes that the draft helps prevent inappropriate life settlements while offering protections to a broader group of consumers including those consumers facing divorce.
“It is a step in the right direction. There are many good elements here,” says Doug Head, executive director of the Life Insurance Settlements Association, Orlando, Fla. The one point that LISA would disagree with, says Head, is the limitation on the sale of a contract outside of the contestability period.
The 5-year moratorium on selling a contract is still “troublesome,” says Scott Cipinko, an industry interested party. However, he notes that the draft does include interesting points such as clarifying the definition of premium financing.
But Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, and a NAIC funded consumer representative, maintains that “it is a terrible proposal. It not only takes away fundamental consumer rights of ownership and disposition of policies,” but also does not address the issue of stranger-owned life insurance.