A viatical settlement bill that unanimously passed the North Dakota Senate received a state House hearing March 6 that drew testimony from industry representatives.
The bill, SB 2268, is one of similar anticipated actions in a number of states, including Illinois and New York, according to Bruce Ferguson, senior vice president, state relations, for the American Council of Life Insurers, Washington. Louisiana, New York and Utah have already issued bulletins addressing life settlements, he added.
In testimony before the Industry, Business and Labor Committee of the North Dakota House, Frank Keating, president and chief executive of the ACLI, argued that the value of a human life should not be reduced to the status of a commodity auctioned off in the futures market.
Insureds may be unaware that once a contract is settled, insurance may not be available if there is a future need because the insured’s policy capacity is used up, Keating said.
He also pointed out that settlements might put the tax benefit of life insurance at risk. He explained that the U.S. Senate Finance Committee recently called on ACLI to discuss revenue implications of life settlements. Although the focus seemed to be on investors, the committee could come perilously close to considering a tax on the product, Keating argued.
On the issue of property rights, he insisted that life insurance is different from other types of property in that it creates a large amount of money on the death of a person.
The bill being considered by North Dakota legislators closely resembles a model draft being considered by the National Association of Insurance Commissioners, Kansas City, Mo. That bill could be adopted by the full NAIC on March 11 during the executive committee and plenary session at the group’s spring meeting in New York.
The ACLI would like to see the bill enacted before the N.D. session ends in April, Ferguson says. He points out that discussions by the legislature have focused on waiting periods in the bill, including the 5-year versus 2-year ban on settlement and exceptions to the 5-year moratorium in the bill.
When the issue is taken up at the NAIC meeting March 11, there may be some opposition to the draft, Ferguson says. Language addressing concerns that the model violates the National Bank and Gramm-Leach-Bliley Acts could be added, he says. Similar language was introduced into the North Dakota bill by the North Dakota Bankers Association, he explains.
The National Conference of Insurance Legislators, Troy, N.Y., is calling on the NAIC to defer action until the NCOIL completes a model act, anticipated by the end of December. The NCOIL group looking at the issue is headed by North Dakota State Rep. George Keiser, R-41 District, who is also head of the state House committee holding the hearing.