State insurance legislators voted to send a strong message to state insurance regulators that they are moving too fast on the regulation of stranger-owned life insurance.
During the spring meeting of the National Conference of Insurance Legislators here, legislators emphasized that the decision ultimately rests with them. State Sen. Ralph Hudgens, R-Ga., summed up the feelings of many legislators when he asked Julie McPeak, Kentucky insurance director and co-chair of the Life & Annuity “A” committee of the National Association of Insurance Commissioners, “Is the NAIC making suggestions as to what it feels is best for legislators?”
McPeak spoke to legislators because a Viatical Settlement model act was just advanced out of NAIC’s “A” Committee and is awaiting action at its Executive Committee and Plenary.
During a March 2 special meeting on life settlements, NCOIL legislators voted unanimously to endorse a resolution that requests the NAIC to delay final action on amendments to its model until December 2007 while NCOIL completes its model. Rep. Brian Kennedy, D-R.I., offered a substitute resolution that removed the request for an NAIC delay of action and noted that NCOIL would address the issue in its own model. In a 24-2 vote, NCOIL’s executive committee voted to issue the original resolution.
It was noted during the discussion that legislators needed to look at the issue quickly because some states are starting to introduce bills based on the NAIC model.
McPeak told legislators that the NAIC model will go before the executive committee and plenary at its spring meeting with amendments that reflect questions raised by banking groups that the current draft illegally hamstrings banks from legitimate lending transactions.
McPeak told National Underwriter that language regulating investor-owned life insurance placed in trusts would probably not result in new language in the current draft. The reason, she explained, was that if 2 sets of amendments were put before the executive committee, it could slow adoption of the model. However, she continued, if the draft is sent back to “A” committee, then the issue would be examined. If the model is fully adopted by the NAIC, it would still be possible at a later point to reopen it to look at changes, McPeak noted.
She said regulators were open to the work of legislators. “STOLI [stranger-owned life insurance] is very complicated. It is not easy to legislate intent, and if you come up with something better, then we would certainly look at it.”
Legislators raised issues during the discussion that included intent at the time of sale, property rights, a 2-year versus a 5-year ban on the sale of a contract, lapses and the possible changes to older age issue premium prices going forward.