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Life Health > Life Insurance

NAIC Responds To Consumer Advocates

By Jim Connolly

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State insurance regulators responded to concerns of consumer advocates about conflict of interest of commissioners who play a pivotal role in developing model laws for the National Association of Insurance Commissioners, Kansas City, Mo.

The NAIC’s Oct. 15 letter is in response to a Sept. 24 letter submitted by 11 NAIC funded consumer representatives. That letter had requested that recently adopted revisions to the Viatical Settlement model law be revisited given concerns over allegations former North Dakota Commissioner Jim Poolman had conflicts of interest when he spearheaded the NAIC effort.

Poolman has vehemently denied these public allegations, arguing both the merits of the viatical model and countering that the life settlement industry was waging a campaign against him. He did however acknowledge receiving a 2006 campaign donation from a Sara Bachrach, who he confirmed is the wife of Ira Brody, a partner with InsCap, New York (see NU, Oct. 1). InsCap was involved in discussions during the development of the model, although Poolman maintained there was nothing illegal about the contribution. InsCap is involved in premium financing and not viatical and life settlements, he added. Brody also contributed $15,000 to the North Dakota Republican party in 2006. Poolman is a Republican.

Life settlement and premium financing representatives have vocally disagreed, maintaining that the model did not cover life settlements used through trusts, and this part of the market was omitted from the model. The NAIC is currently looking at the possibility of a new model to cover these transactions as well as new types of transactions that develop.

The NAIC letter reads: “The NAIC is aware that allegations have been made concerning conflicts of interest related to the revisions to the model. The NAIC is addressing the allegations through appropriate channels and evaluating the available facts concerning these issues. You should also be aware that, independent of any issues, related to the Model, the NAIC and its members are currently in discussions concerning revisions to the Conflict of Interest policy. These discussions are ongoing.”

The letter is signed by NAIC leadership. NAIC declined to comment on how allegations are being addressed or to provide details of the conflict of interest policy.

However, several regulatory sources said the policy had been discussed during the Commissioners’ Roundtable at the fall NAIC meeting and that it had been decided to do more work on the proposed changes rather than advance them.

The NAIC letter also discusses the merits of the viatical model, noting “many important consumer protection issues” including a 5-year limitation on certain sales of life insurance policies and enhanced disclosure requirements.

Groups including the American Council of Life Insurers, Washington, and the National Association of Insurance and Financial Advisors, Falls Church, Va., support the model.

Birny Birnbaum, an NAIC funded consumer rep and executive director of the Center for Economic Justice, Austin, Texas, said the NAIC response really does not answer questions posed by the consumer reps’ letter. And, he said, consumer advocates did not support the 5-year ban on the sale of a life insurance contract nor the “laundry list” of disclosure requirements as presented because the way it was set up would not clarify the transaction for consumers. He added that consumer reps did not feel the model addressed stranger-owned life insurance, a transaction where a third party pre-arranges to buy a policy solely for gain.

Additionally, Birnbaum says, the NAIC is again discussing a major policy issue, a conflict of interest policy, behind close doors, preventing input from constituents.

Bill Newton, an NAIC funded consumer and executive director of the Florida Consumer Action Network, Tampa, Fla., also said he would have liked to see the process be more open. He said it was good that allegations are being addressed and is looking forward to seeing the results.

Doug Head, executive director of the Life Insurance Settlements Association, Orlando, Fla., said review of the NAIC’s conflict of interest policy is a good thing for the NAIC. He noted the concerns that had been raised with the model and the request of stakeholders including the National Conference of Insurance Legislators, Troy, N.Y., to defer adoption of the model.

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