The discussion on how to curtail the sale of life insurance contracts initiated solely for the purpose of resale, which roiled the industry last year, will continue this year on several different fronts.
On Jan. 5, the National Conference of Insurance Legislators, Troy, N.Y., was to hold an informational conference call so that legislators could gather comments before determining actions to be taken.
An NCOIL subcommittee is looking at the issue to determine whether it should revise the current model or develop a new one to reflect changes in the market since NCOIL’s previous model was adopted, says Susan Nolan, NCOIL executive director.
A model developed by NCOIL and another developed by the National Association of Insurance Commissioners are currently available for state enactment. The NAIC model has been adopted totally or in part by the about 30 states, Nolan says. NCOIL’s model was not adopted as widely, she adds.
NCOIL, according to Nolan, will need to decide whether to revise its model, develop a new one or issue a resolution opposing policies bought solely for resale. NCOIL could also decide to work on a model as well as issue a resolution, she explains.
The NAIC has been revising its Viatical Settlement Model Act, and changes have been adopted through its “A” Committee. The revision could be finalized during the organization’s spring meeting in March.
The NCOIL request asks for comment on the current draft of the amended NAIC model awaiting adoption.
The 4 areas of comment the request focuses on are: the definitions of ‘fraudulent viatical settlement act’ and ‘viatical settlement contract’; license and bond requirements; disclosures to viators and insurers; and prohibited practices, particularly the 5-year ban on settlements.
Among those who will be participating in the NCOIL conference call are: the American Council of Life Insurers, the Life Insurance Finance Association, and Life Insurance Settlement Association.
Additionally, the ACLI, the National Association of Insurance and Financial Advisors and the Association for Advanced Life Underwriting, as well as the National Association of Independent Life Brokerage Agencies, will submit a joint letter expressing support for the NAIC model, says Whit Cornman, an ACLI spokesman.
Doug Head, LISA’s executive director, also plans to speak during the NCOIL call. Head says his organization opposes cases in which, from the very start of the contract, there is an agreement to sell the contract, a kickback or an improper agreement between a buyer and a contract owner. “We don’t want to see an improper act,” he says.
However, Head also thinks there should be a disclosure informing new contract holders that they have a right to know what the value of their contract would be if it were settled.
He also says that to extend a ban on the settlement of contracts beyond 2 years after the initiation of the contract is an infringement on the property rights of contract holders. The 2-year ban fits in with the traditional period of contestability, Head says.