A coalition of life insurance organizations is asking for a crackdown on “stranger-owned life insurance” arrangements, while life settlement firms are emphasizing their commitment to strong market rules.
The life industry groups, which teamed up to issue a statement Tuesday, includes the American Council of Life Insurers, Washington; the Association for Advanced Life Underwriting, Falls Church, Va.; the National Association of Insurance and Financial Advisors, Falls Church, Va.; and, the National Association of Independent Life Brokerage Agencies, Fairfax, Va.
The coalition says in the statement that the National Association of Insurance Commissioners, Kansas City, Mo., and regulators in individual states should protect insurable interest laws and prohibit SOLI transactions.
SOLI firms arrange for investors pay life insurance premiums for older, unrelated life insurance applicants.
The SOLI investors end up with the right to collect some or all of the life insurance policy proceeds.
SOLI arrangements are different from legitimate life settlements, or sales of in-force life insurance policies, the coalition says.
The SOLI arrangements “circumvent the intent behind state insurable interest laws, which are in place to ensure that the person taking out an insurance policy has an interest in the insured’s continued good health,” according to the coalition that issued today’s statement.
The coalition statement has come out during a time of intense activity in the area of life settlement regulation.
The Life Insurance Finance Association, Atlanta, will meet in New York Wednesday, and the Life Insurance Settlement Association, Orlando, Fla., will start a 3-day meeting of its own Wednesday.
The NAIC’s Life and Annuities Committee expects to discuss a major revision to the current Viatical Settlements law during the NAIC’s 4-day winter meeting, which will start Dec. 9 in San Antonio.
Changing the NAIC model law could help, but individual state insurance departments also have to act, to keep “shrewd investors and hedge funds” from using “loopholes in the law” to complete SOLI transactions, according to the coalition that issued today’s statement.
LISA and LIFA have urged state regulators at the NAIC to stop violations of insurable interest laws while leaving room for the completion of legitimate premium financing and life settlement transactions.
LISA “is strongly committed to the progress of our industry and the association has, as its mission, the promotion of the development, integrity and reputation of the life settlement industry and to promote a competitive market for the people it serves,” LISA says in a statement of its own issued today.
LISA has supported efforts to enact strong state life settlement broker fiduciary laws and other efforts to establish rigorous life settlement market laws and regulations, the group says.
In the past, LISA and LIFA have opposed a proposal by North Dakota Insurance Commissioner Jim Poolman to make consumers wait at least 5 years before selling life insurance policies.
Insurance and producer trade groups have suggested a 2-year ban but have not opposed the 5-year-ban proposal.