Trade groups say they want to hear more about a life insurer’s efforts to use a new policy loan program to create an option for customers who otherwise would sell their policies.
The unnamed life insurer has asked regulators about whether it could offer a loan program aimed at policyholders whose health has changed since their contracts were issued.
Eligible policyholders who met program underwriting criteria could borrow unusually high amounts against the contract’s death benefit, according to discussions under way at the National Association of Insurance Commissioners, Kansas City, Mo.
Today, insurers cannot offer a loan that exceeds a policy’s cash surrender value.
Because of that restriction, some states could ban the loan program that the unnamed life insurer is proposing, regulators say.
Regulators want to see whether creating a model allowing changed-health loan programs would be feasible.
One life insurance company representative who asked for anonymity asked whether tax issues could block implementation of a changed-health loan program.