Advisors in life settlement transactions continue to work with their clients and conduct their transactions despite the heated debate surrounding the market.
Even so, with some in the industry sounding the alarm about the negative image being given to settlements by certain regulators, such advisors are asking what role can they play in “spreading the message” about settlement attributes.
For Bob Nelson, vice president of financial and estate planning for Grace/Mayer Insurance Agency Inc., Omaha, Neb., much of that work should involve showing what the life settlement industry truly is.
“It is an industry that has evolved into one of respect” and is fundamentally based on being consumer friendly, he said. “I don’t think anyone I respect in this business is in predatory mode,” nor are they preying on seniors with unscrupulous transactions, he added.
The big problem facing life settlements, he said, is the difficulty, in some corners, in differentiating between actual legitimate life settlements transactions and what Nelson referred to as “marketing schemes” that fall under the category of stranger- or investor-originated life insurance.
“That’s the challenge the regulators are facing,” he said.
As an emerging industry, one of the major challenges facing life settlements is establishing its identity and avoiding being cast in a negative light.
Regulators and other policymakers continue to work towards eliminating some questionable insurance transactions, primarily involving stranger-originated life insurance known as STOLI. However, many in the life settlements industry feel that some of the proposed solutions fail to address the root of the problem and would also significantly damage the market for legitimate life settlement transactions.
Among the most contentious regulatory concerns for life settlements is the proposed Viatical Model Act update being considered by the National Association of Insurance Commissioners, Kansas City, Mo. Some in the settlements industry feel this proposed change would, in the name of rooting out STOLI transactions, unfairly limit the ability of consumers to sell their policies.
The NAIC proposal “walks around” STOLI issues and unfairly targets life settlements, said Ramiro Rencurrell, director of life settlements at Magna Administrative Services Inc., Coral Gables, Fla., and president of the board of directors for the Life Insurance Settlement Association, Orlando, Fla., during a recent roundtable discussion. The roundtable was sponsored by National Underwriter Life & Health.
Other speakers at the roundtable also said they were not given the chance to make arguments against the model act update.