State legislators voted to address the issue of life insurance sold solely to be resold at a later date by building on a model act adopted by the National Conference of Insurance Legislators rather than a model that is currently being revised by state insurance regulators.
During a NCOIL conference call, the motion was carried by a 5-0 vote. NCOIL, Troy, N.Y., has a life settlements model act, while the National Association of Insurance Commissioners is currently amending its existing viatical settlements model, which is awaiting review by the NAIC’s executive committee and, potentially, plenary.
Speaking for NCOIL, North Dakota State Rep. George Keiser, R-41 District, asked that comments offered by interested parties address issues including: policies that are manufactured solely for the purpose of resale by investors; the use of these policies in trusts; insurable interest; and the issues of fraud and the need for disclosure.
Keiser said that if parties could collectively discuss issues and submit comment, it would be helpful to legislators.
The goal in amending the NCOIL model, according to Keiser, should be to narrowly define specific problems without damaging appropriate uses of the product.
Georgia State Sen. Ralph Hudgens, R-47 District, said he thought the current NCOIL model in place in Georgia regulates the viatical and life settlements market well. Consequently, NCOIL should start looking at the issue of manufactured policies that are created solely for resale by using its own model as a starting point, he added.
Hudgens said during the call that Georgia Insurance Commissioner John Oxendine did not support the amendments being considered by the NAIC and does not believe the NAIC will adopt those changes.
Oxendine confirmed the statement with National Underwriter, saying: “I am opposed to the model as it stands. It is not in the best interest of consumers. I will keep an open mind, but if I had to vote on it today, I would oppose it.”
New York State Sen. James Seward, R-51 District, and chairman of the Senate Committee on Insurance, said that while he understood the need for discussion, New York does not have a law addressing life settlements, although it does have a law that addresses viatical settlements for the terminally ill. So, he said, he does not want to wait too long to develop legislation.
“I’ve seen very misleading advertising and bad practices and manufacturing of policies,” Seward said. “There ought to be a way to plug loopholes. The longer this goes on, the less integrity life insurance has.”
During the call, M. Bryan Freeman, president of Habersham Funding, Atlanta, a life settlements company, said 38 states regulate either viatical or life settlement transactions in the secondary market.
In a letter to NCOIL dated Jan. 24, 2007, State Rep. Robert Godshall, R-District 53, wrote that 3 important points must be considered by NCOIL:
–Protecting consumers against investor-initiated life insurance.
–Ensuring that “we do not harm the viable and established secondary market for life insurance, which has provided great benefits to consumers.”
–Maintaining NCOIL’s role independent of the NAIC to study issues and establish public policy.
Comments for the NCOIL discussion during its spring meeting in Savannah on March 1-4 are due by Feb. 20.