Life insurers, life settlement companies and consumer representatives are gathering their thoughts on the most recent draft of the Viatical Settlements Model Act, which updates an earlier model adopted by the National Association of Insurance Commissioners, Kansas City, Mo.
The model is being reviewed by the NAIC’s Life Insurance and Annuities “A” Committee following discussion at the NAIC’s fall meeting last month in St. Louis.
Comments are currently being received until October 23, after which it is anticipated that a conference call will be held.
North Dakota Insurance Commissioner Jim Poolman has said he hopes the draft will move out of the “A” committee to the NAIC’s executive committee and plenary by the end of the year so that it can be ready for commissioners and state legislatures at the start of 2007.
While allowing that this timeline is “aggressive,” Poolman says he thinks it can be achieved.
Poolman says that at a hearing in New York this summer, there was support for a 2-year moratorium on the sale of life policies. The 5-year measure proposed in his draft offers, he says, a margin of conservatism to ensure that inappropriate stranger-owned life insurance cannot be sold.
There is general support among a number of commissioners for a 5-year proposal, he says, adding, however, that a straw poll has not been taken.
“We are completely supportive of the fundamental concepts of the Poolman amendments,” including a 5-year prohibition on the settlement of life insurance contracts, according to Michael Lovendusky, associate general counsel with the American Council of Life Insurers, Washington.
ACLI, along with the Association for Advanced Life Underwriting, the National Association of Insurance and Financial Advisors, and the National Association of Independent Life Brokerage Agencies are conducting an “exhaustive” review of the latest draft, according to Lovendusky. The industry efforts are “very inclusive,” he adds, and include discussions with financiers, lenders and settlement providers.
Approximately a dozen changes could be recommended by the industry once discussions and a review are completed, says Lovendusky.
He says he believes it would be possible to have a revised model to executive and plenary at the NAIC by year-end.
Lovendusky says the Poolman amendments differ from an initial industry proposal in several ways. The industry proposal was a 2-year rather than a 5-year proposal; the industry proposal more narrowly defined a life settlement, while the Poolman amendments more liberally define such contracts to include certain financing arrangements; the industry draft backed in some of these financing transactions by stating that traditional financing arrangements would be exempted; and the Poolman proposal offered consumers additional protections.
“We will offer modifications to that proposal” in order to “try and define specific issues raised and addressed,” says Doug Head, executive director of the Life Insurance Settlement Association, Orlando, Fla.
LISA’s comments will seek to address transactions that are a “cloak for inappropriate non-insurable interest transactions,” he continues. But, Head adds, “Our efforts are to sustain consumer rights [in legitimate transactions.]“
Head asserts that LISA has always been opposed to inappropriate sales.